Jameson on the Rocks

May 16, 2011

The past few weeks have been rather Busy for your humble correspondent, which is not to say that they have been Unpleasant but rather that they have allowed precious little time for reflection and synthesis.  I can’t tell when I’ll be able to resume a more regular schedule, but rest assured that I will feel at least some pangs of guilt the next time an evening is spent with America’s Next Top Model on DVR instead of with my Dear Readers.

During one of these recent Busy weeks, I had the pleasure of taking a brief business trip to Dublin, a place I last visited as a student just under a decade ago.  It was a treat to be back, not least of all because I now had the novel combination of comfortable lodging and disposable personal income.  I realized that this was the first time I had revisited an international travel destination after any meaningful gap, so it was impossible to resist the temptation to compare notes with my memories and seek out familiar streets and sights.  I was pleased to have retained enough of a sense of the geography to project that typical city-kid confidence and purpose even in aimless wandering; within an hour of my first adventure outside the hotel, I was asked for directions by American tourists.  (My guess would have been correct, but I punted.)

I don’t at all mean to downplay the distinctiveness of Dublin, but my overarching conclusion was that it felt vaguely more “American” than I had remembered.  Some of the parallels were superficial and amusing (e.g., gourmet burger franchises, white people with dreadlocks) but others more ominous (e.g., foreclosed houses, moth-balled construction projects).  I remember how shocked I and my fellow American students were at the lack of conspicuous obesity that is such a hallmark of travel within the States.  Based on my extremely non-scientific observation from a few hours of walking and pubbing, however, I’d posit that the gap has narrowed as the Irish, perhaps, have widened.

And of course there was the economy.  During my summer as a student, the Celtic Tiger was somewhat wobbly on the back of the post-Dot Com global contraction (particularly in IT, which had become one of the country’s strengths) but it was still fundamentally sound.  Now… well, even the cab drivers wanted to chat about negative home equity.  My reception at the border could only have been more palpably chilly if instead of describing my profession as “Finance” I had opted for “Smothering Cute Animals.”  Young Americans are often wise to pretend to be Canadian if they happen to be abroad during moments of geopolitical instability.  I think from now on I may offer something squishy and believable in lieu of my actual business purpose; aren’t I, after all, part of the new media by virtue of this site?

I haven’t studied Ireland’s public finances (it’s hard enough to analyze enterprises that aren’t run by politicians) but the contours of their situation will be familiar to most observers of the developed world: gross misallocation (in hindsight!) of capital to housing and construction, whose asset values kept rising until they didn’t; insufficient capital to absorb losses at highly-leveraged financial institutions; sudden structural dislocations in labor markets; prohibitively expensive entitlements but no dry powder for countercyclical fiscal policy; etc etc.  Some sort of rationalization is inevitable, but I don’t have a view on when or what will trigger it, or how it will play out in practice.

I would, however, caution against counting Ireland out.  In my occasional conversations with businesspeople and with Joe Soap (again, an extremely non-scientific set of data) I was struck by how not-angry it seemed that people were about the situation.  Their tones were generally sober and pragmatic – certainly not optimistic – but inflected with a sense of collective responsibility.  The narrative was not that the country was screwed by, take your pick: greedy bankers, incompetent government, reckless consumers, or some other Other.  It was more like that the country had had a grand old bender and now everyone needed to clean themselves up.  Assuming that my reading is fair, this wouldn’t change the vast scale of the problems that Ireland (and many of the world’s governments, i.e., people) have ahead, but it would give me more hope that a solution might be reached there before it’s reached in a country where folks take to the barricades to protect the social entitlements that they refuse to pay for.

Slogans and economic dogma aren’t going to fix the massive structural problems with the world’s economies.  Patience, pragmatism, and a sense of collective responsibility, however, seem like constructive places to start.


Paper or Plastic

April 19, 2011

Rationalization is a fact of life.  We’re complex, our world is complex, and we often have to balance competing desires.  It shouldn’t be surprising that some of our decisions or patterns of behavior conflict with our stated beliefs and values.  One may think of oneself as “concerned about the environment” but have energy-intensive habits (or at least not be perfect about turning off the lights when one leaves home).  One may think of oneself as “in favor of small government” but like receiving certain benefits.  One may think of Wal-Mart as the root of all evil but shop there anyway.  Cognitive dissonance is uncomfortable, so one has to engage in some sort of rationalization (consciously or not) for the behavior in light of the stated beliefs.  I think it might be revealing to try for a day to take note of all my actions or inactions that cause me to rationalize, but even then I’m sure I would miss some.  I think it’s imperative, though, to look for such patterns over time and come to terms with them.

I’m brought to this discussion via Felix Salmon (thanks to YA) who calls attention to a really delightful takedown of JPMorgan Chase CEO Jamie Dimon, by Illinois Senator Dick Durbin, on the subject of debit interchange.  (Here’s one example of cognitive dissonance: I like to believe I’m a nice person, but I always enjoy a snarky slam when it comes from a place of righteousness – like a priceless Frank Bruni critique of an awful restaurant.)

It really shouldn’t be controversial to assert that interchange (on debit and credit transactions) is too damn high.  There’s a religious debate to be had over whether (and how) government should intervene in oligopolies that are superficially competitive but, really, collectively extract huge economic rents. 

I’m more interested in how people (including myself) rationalize their usage of debit and credit cards as payment mechanisms in light of what we know about interchange fees.  Put simply: it cost merchants something to accept card payments.  This cost can be relatively small, in the case of a PIN-based debit transaction; or it can be several percentage points, in the case of an American Express transaction.  The merchant receives some benefit from this arrangement, such as the volume that results from people’s tendency to spend more freely on plastic, as well as the security of not having to handle as much cash on premises.  The customer receives some benefit too, which is generally proportional to the fee charged to the merchant.  A PIN-based debit transaction only gets me the benefit of not having to carry cash for my purchases.  An AmEx transaction gets me that benefit as well as loyalty points, an interest-free grace period before I actually have to pay my bill, and whatever cachet AmEx seems to think it confers.

Here’s what should cause dissonance, though: credit cards, particularly when used at low-margin businesses, generally transfer wealth from less-affluent customers to more-affluent customers (and large financial institutions).  Progressives hate this concept in the general case, but seem to accept it as a consequence of their (our) payment choices.

When I use my AmEx at a fancy restaurant, I think it’s a clear win for everyone.  It’s hard to guess what my spending would look like in a world without plastic, but it’s almost certainly true that I would spend less freely and less often.  So the restaurant probably ends up incrementally better off, which can be possible even at a lower margin if there’s an offsetting increase in sales volume.  As such, they would not necessarily need to raise prices. 

But the dynamics are different when I use my AmEx at a neighborhood grocery store.  Grocery retailing is generally a competitive, commoditized business.  Operating margins tend to be in the single digits.  My basket of groceries at D’Agostino’s (or Stop & Shop, etc.) is probably about as profitable as a pensioner’s or middle-class family’s.  There are plenty of grocery stores within walking distance, so no store can be too much of an outlier on price.  When AmEx takes a few percentage points off the top, it can be very meaningful to the grocer’s overall economics.  That lost margin needs to be made up somehow.  It’s not volume; I’m not likely to buy more eggs just because I have plastic instead of cash.  To some extent, the grocer can push back on its suppliers; but the largest of these, too, are low-margin, competitive businesses.  To some extent, the grocer can try to shift me to higher-margin products, like store-brands or fancy organic foods; but I’ll buy what I want to buy.  The other lever is simply to charge higher prices across the board.  Implicitly, this means that everyone pays higher prices for benefits that accrue only to credit card users and the financial institutions behind them.  This is what I mean by wealth transfer.

A progressive person should prefer to pay cash, or use PIN-based debit transactions, in order to minimize the cost to merchants (and, by extension, the costs that are passed on to other consumers).  But the prisoner’s dilemma gives him or her an easy out for rationalization: someone else is going to use a credit card, which means there is going to be a mark-up on prices anyway – so I might as well get my points too!

Maybe it doesn’t occur to people that it costs merchants something to process a card transaction.  But I think the more likely explanation is that card usage creates externalities, and people (including myself) generally have an easy time rationalizing decisions when the harm is vague and diffuse, but the benefit is clear and personal.  (Wonder why we have a $14 trillion national debt?)

Cobra Libre!

April 9, 2011

There was a bit of a stir around Gotham a short while back when it emerged that a venomous Egyptian cobra had gone missing from the Bronx Zoo.  We’ve grown accustomed to enduring risks great and small as part of life in this city, perhaps to the point of becoming too jaded by them.  One highlight of the whole affair was an exceptional Twitter feed imagining how a modern snake on the town might entertain herself (my favorite: “Holding very still in the snake exhibit at the Museum of Natural History. This is gonna be hilarious!”).  My younger self, who harbored a mortal fear of snakes (not usually the most obvious source of terror for a city kid), would probably not have been as amused.  But all’s well that ends well, I suppose, and I hope the Bronx Zoo gets a nice uptick in tourist traffic for its trouble (and maybe a few leftover stimulus dollars for better security?).

With snakes on the brain and the subject of fear not far from my memory, I found myself thinking about “snake oil” and the multi-billion dollar industry of products and services that cater to our desires and vulnerabilities without the burden of unbiased empirical proof.  If I were to lose some of my capacity for shame in a tragic personality-accident, I would immediately start a career developing and marketing nutritional supplements.  Sites like Drugstore.com and Vitacost.com (both of which I frequent) read like catalogues of human insecurity.  Too fat?  Too thin?  Too much hair?  Too little hair?  Are you worried that your feeling of fatigue at the end of the day might be a sign of heart disease, cancer, or Restless Leg Syndrome?  There are dozens of pills, creams, and yoga regimens on DVD for each of those.

One of many valuable lessons I acquired from years of weekend trips to the racetrack is: be skeptical of offers that defy the logic economic self-interest.  If a handicapper were unnaturally skilled at picking winners, why would he publish his recommendations and thereby dilute the returns he’d be able to get from making bets himself? (Or, even better: launching a hedge fund to bet other people’s money!)  Why wouldn’t he have earned so much money from his wagering prowess that he could afford to stop running a business every day?  Investment managers operate similarly, by the way.  “Talking your book” – i.e., persuading people of your investment case for or against a security – can be a pretty good way to create the marginal buyer or seller that pushes a trade in the direction you want it to go.  The issue isn’t that the handicapper or the investor can’t have good ideas — it’s that their greater economic incentive is to convince you that they are right rather than to just be right.  So one should approach such ideas skeptically, and even more so if one is being asked to pay for them.

If it were really true that a supplement could reliably make you thinner, why would there still be so many overweight people?  Well, one answer might be that the treatment is prohibitively expensive, but that is not the case for most supplements out in the market.  (As a sidebar, I think there’s an interesting debate to be had about subsidizing gastric bypass surgery, for example, as a way to fight the health complications and public cost implications of morbid obesity; another story for another time.)  Another answer might be that it only works on certain individuals, or in combination with other supplements, practices, environmental factors, etc.  Perhaps – there is a lot we don’t know about health, medicine, and wellness.  Yet another answer might be that the market just isn’t aware of the benefits of the supplement.  This explanation has the added benefit of giving the consumer the sense that he is in on a special secret that will give him a leg up on the Joneses and Smiths.

None of these explanations is as simple as the racetrack-tout test.  The economic imperative is to convince you that the supplement works, not to create a supplement that works.  If the supplement works, that’s gravy for the distributor and the consumer.  The placebo effect is a win-win.  Why we have a heavily regulated prescription drug industry that places billions of dollars on the line over tiny observable statistical effects (that may not even correlate to health outcomes!) alongside a parallel universe of snake oil businesses wrapped in pseudoscience, nature-shamanism, and shameless exploitation of celebrity is beyond my comprehension.  (Actually, it’s not: there are obviously entrenched economic interests on both sides.)

I will be the first to admit that I am a complete sucker for supplements of all kinds, in spite of everything I’ve just written.  The dissonance reminds me of Pascal’s gambit: if I take this supplement, maybe it does nothing and I lose some money, but maybe it works and I avoid cancer!!! My rational consumer heuristics short-circuit a bit when inconceivably good or bad outcomes are thrown in the mix.  I rarely consider whether the supplement could be actively harmful, even though that seems like the most reasonable prior assumption (after all, it’s something foreign to disrupt my highly evolved homeostasis) and should therefore bias me strongly against taking anything.

Perhaps this episode should teach me to be less worried about snakes on the town than about the snake oil in my medicine cabinet.

Numbers Game

March 27, 2011

The question is sometimes asked, among trusted colleagues, as they suffer together through a particularly grueling stretch of work: what’s your Number?  If you left the office tonight, checked your bank statements one last time before bed (as one does…), and discovered that some magnificent windfall had increased your net worth to the point that you no longer felt you needed to come back to the office tomorrow: what would that Number be?  At what point would you decide you had ‘enough’ and could choose from then on to do only that which you actually wanted to do, rather than continue to make compromises to get to that point?

In polite company, one rarely discusses matters financial in such concrete terms – one prefers to hint instead at one’s level of compensation through one’s branded possessions, vacation destinations, taste or consciously-affected lack thereof.  Discussions of the Number, however, seem to fall outside this prohibition.  I think this may be because the people with whom I’ve had such discussions over the years all generally believe, with good reason, that everyone in the discussion is likely to be able to hit their Numbers eventually, assuming they choose to maintain their professional status quo.  It’s not a question of one’s pole position (i.e., how much do I have?) as much as one of where the checkered flag is.

I’ve tended to arrive at my Number through pretty simple analysis.  What amount of after-tax cash flow do I think I’d need each year to maintain my desired lifestyle (which does not necessarily involve Per Se for dinner every night, but probably does still involve seeing my trainer twice a week)?  What pre-tax income is required to produce that amount of after-tax cash flow?  Assuming this pre-tax income can be generated from an endowment that produces a fairly conservative 4-5% annual return (net of inflation), I multiply this pre-tax income by 20-25 and have my range of Numbers.  Clearly the definition of “lifestyle” is the driver.  My Number would be much lower if I planned to live in a less expensive city that New York (i.e., basically anywhere) and lower still if my game plan were to retire to a beach in, say, Belize.  It will probably have to be significantly higher if I decide I want to have children.  In any event, I can see a path to getting there while I still have a few decades left to enjoy it, God willing.

By happy coincidence, I read Graeme Wood’s piece from April’s Atlantic shortly after having refreshed my mental calculations and having steeled myself for another 15 or so years of the status quo before I’d expect my Number to be within reach.  I’m still in such (pleasant) shock from this essay that I’m struggling to hone in on what, exactly, was so shocking to me.  Wood paints a balanced, nuanced portrait of the “Secret Fears of the Super-Rich” as they emerge in a Boston College study of people whose net worths exceed $25 million.  Among other gems, I keep coming back to the chilling finding that, “most of [the families in this study] still do not consider themselves financially secure; for that, they say, they would require on average one-quarter more wealth than they currently possess.”  These are people with tens of millions of dollars! People who have done a swan-dive past my Number, straight into Scrooge McDuck’s money bin!  Could these stories really mean that there’s always a white flag after every lap?

There’s nothing particularly novel about the observation that money can’t buy happiness (or, one of hip-hop’s great lessons in causality: Mo Money, Mo Problems) but I had never really considered that it can’t even necessarily buy a sense of financial security.  Or that the price of even hard-earned wealth could be disenfranchisement from the shared human experience.  On feeling unable to discuss one’s everyday problems with those who haven’t hit their Numbers: “The poor-little-rich-kid retort is so obvious—and seemingly so sensible—that the rich themselves often internalize it, and as a result become uncomfortable in their interactions with the non-wealthy. Once people cross a certain financial threshold, they have a tendency to hang out with one another, to enjoy the company of other people who know that money relieves some burdens but not others.”  It must be excruciating to feel as though one has permanently surrendered one’s right to complain or commiserate.

I recommend Wood’s article highly and I expect to use it as a prompt to try to stop counting laps and, instead, start to learn to enjoy driving.

Frequent Flyer Bile

March 14, 2011

One of my blog role-models, Kottke.org, relayed an amusing comparison between an interaction he had on Twitter with a corporate representative of Zappos, and one that an unlucky customer had with a representative of United Airlines.  The punchline isn’t too surprising: unlike the slick new-generation retailer (with which, by the way, I’ve only had good experiences), the old corporate dinosaur manages not only to create misery for the customer but also to very publicly bungle the follow-up.

Kottke avoids the easy commentary (i.e., the Seinfeld-ian “what is the deal with airlines??”) and gets to the heart of the matter by suggesting that the “customer communication problems” at United “originate higher up the pay scale” than whatever front-line rep was responsible for the Twitter faux pas (can I coin the phrase ‘dim twit’ here?).  I’ve certainly experienced the frustration of unsatisfying service, but I also tend to give the benefit of the doubt to the people on the front lines if it’s obvious that they’re many layers removed from any real authority (as opposed to, say, an inept waiter).  I’ve seen a couple of call centers first-hand and they can be about the most dehumanizing and miserable work environments that don’t require manual labor.  Imagine being asked to placate angry people all day when you most likely have insufficient information about the situation that causes the customer’s problem, very little discretion in practice to resolve it, and numerous competing objectives to meet in terms of call volume and quality.

I’m going to go a step further than Kottke and say that this evidence doesn’t necessarily indicate a customer communication “problem.”  I think it’s amazing that I ever get efficient customer service from most companies.  I also think it’s amazing that most people seem to expect that they can (and should!) get efficient customer service when they also demand low prices, high convenience, seamless execution and — and this is the big ‘and’ — actually aren’t willing to change their behavior when they don’t get it.

“The Customer Is Always Right” is a maxim that is probably about 80-90% true, but that we like to believe is 100% true.  (I’d posit that lots of rules for health and personal finance are in this category, like “Eating Your Vegetables Protects You From Illness” and “Stocks Deliver Meaningfully Positive Returns in the Long Run”.)  It is certainly true insofar as a business will fail if it doesn’t satisfy a real need in the marketplace (even if it is the enterprise itself that manufactures the need, like Apple and its magical little devices).  It’s also excellent guidance for newer businesses, and/or businesses in very specialized niches, that can learn a lot about how to refine their product and their pitch based on feedback from key customers.  It’s also probably a good rule for avoiding PR embarrassments or, worse, litigation or the scrutiny of sound-bite-seeking politicians.

The 10-20% untruth to this maxim is that it only applies to customers who are worth serving.  This isn’t a moral distinction.  Some customers (or types of customer) are unprofitable for businesses to serve.  You might be one of them!

I suspect it doesn’t often occur to people that they might be something other than a valued customer.  To be blunt, a valued customer is one that is profitable for the business to serve.  There’s some room for nuance — for example, offering different levels of service for different types of customer, or even explicitly charging for better service.  But, generally, a business serves profitable customers well because there is incentive for them to do so, and it’s probably priced into their product anyway.  Similarly, if a customer places disproportionate and costly demands on a business that operates on an insufficient margin to bear them, it literally destroys value for the business to transact with such a customer.  And if it would turn a profitable customer into an unprofitable customer to give them service at the level they claim to demand, the business is probably better off calling the customer’s bluff.  In the case of airlines, I suspect that price, convenience, and availability of flights are by far the biggest drivers of purchase decisions, so it would not obviously give a competitor an advantage to incur greater costs in providing service.

Some examples may help illustrate this concept.  I am clearly a valued customer of American Express.  Even though I never carry a balance, I generate hundreds if not thousands of dollars in interchange fees for them every year just for swiping my card.  The incremental cost of serving me is very low: I’d imagine their costs are pretty fixed in terms of maintaining their actual payment network, and I don’t have weekly calls with a customer service rep to see how they’re doing, so my revenue stream is very profitable for Amex.  If I ever lose my card, they will (and should) fall over themselves to get one back in my hands as soon as humanly possible. But if I ask them for a break on my annual fee, that’s a tougher business case to make, and they probably should call my bluff as to whether I’m really going to change all my recurring payments just to spite Amex out of a tiny percentage of my overall spending (not to mention the horror of having to present a plebian Visa on dates!)

I am not, however, a valued customer of Chase (although I don’t think they realize this).  I keep a pretty small balance in my checking account at most times.  They have the privilege of paying me nothing on my deposits, and they can go out and earn some sort of return by lending or investing them.  Based on the numbers in question, though, I’d be surprised if they earned more than $50 a year on this funding game – and then they have to maintain all these ATMs and branches and personnel and a snazzy website on top of all that.  I’m guessing I’m somewhere between break-even and modestly unprofitable for them.  For a customer like me to be profitable, the bank has to bet either that I’ll decide to buy other financial products for them on a basis other than price (the idea that I will pay for a banking ‘relationship’ is vaguely hilarious to me) or that I’ll screw up and give them reason to charge me a fee.  Is it any wonder that people think their banks are out to screw them?  They are!  It’s how you become a profitable customer!  (By the way, I’ve not had any explicitly bad experiences with Chase’s customer service, mostly because I’ve rarely needed it.)

If you are the customer of an international airline that, in a banner year, would be pushing a 5% profit margin: in how many circumstances will it really be worth it for them to make exceptions to their global logistics enterprise to make your life incrementally easier?

I think our intuitive notion of being a “good customer” goes like this: I’ve been a customer for N years.  I’ve endured various indignities and inconveniences to consume your product or service.  I tell my friends how great your product is.  And I even follow you on Twitter!  There are important nuggets in this narrative that suggest we should take a fairly broad interpretation of what it means for a customer to be profitable.  It’s nice to have loyal customers because you don’t have to keep incurring costs to acquire them.  It’s nice to have customers that have revealed that they are willing to accept less-than-perfect execution, even though they might complain about it.  These features are relevant to the bottom line — but only up to a point.

There are a couple of other confluent explanations for why people persist in having unrealistic expectations for customer service.  One is that it is possible to get excellent customer service from many businesses — namely, the businesses for which you are a profitable customer, and where you might actually walk away from bad service.  Another is that, well, most of us (myself included) like to think of ourselves as special little snowflakes and we don’t like being reminded (even implicitly) that we’re just another entry on a business’ revenue and expense lines.  Nevertheless, I think a dose of economic humility can help us waste less of our time, energy, and emotional capital railing against the service we get from companies that elect not to offer better service for sound business reasons – or at least encourage us to follow up on our threats to pay a little more for better service somewhere else.

Good Questions

March 7, 2011

As much as I use CNBC as the poster child for All That Is Wrong with: (1) the 24-hour news cycle; (2) financial journalism, or more accurately, financial journal-tainment; and (3) the way business and finance engage in public discourse – I have to admit that it’s a necessary evil to watch “Squawk Box” most mornings.  It delivers a pretty reliable and quick summary of top stories, including sports scores (which is a key for feigning interest in small talk during baseball season, if I haven’t watched SportsCenter recently).  And, as Pat Kiernan’s In The Papers segment is the crown jewel of the NY1 morning program, the Aflac Trivia Question (which seems to pop up between 7:25-7:30am) is both a nice way to acquire or remember a fun fact and a helpful prompt to get my butt off the couch once it’s over.

This morning’s Aflac Trivia Question was: “John Wayne never scored a touchdown while playing for what university’s football team?” 

I’ll provide the ‘correct’ answer at the end of this post, but because I am a smart ass, my first answer would have been: “All universities.”  It is unlikely that John Wayne attended more than one university, and the question implies that he didn’t score a touchdown while at the university he attended.  Therefore, there does not exist a university where John Wayne scored a touchdown while playing on its football team.

Of course, my ruse would fail if John Wayne actually scored a touchdown at the University X he attended, in which case the answer would be “All universities but X” – and this would be a very tricky way of accessing the piece of knowledge that the question presumably wanted to test (i.e., where did John Wayne go to university – although, fun fact, he didn’t graduate)?

The question could have been even more interesting if John Wayne had played football while attending both Harvard and Yale (say, because he transferred to the superior instiution in New Haven after his sophomore year) and scored a touchdown only during his Yale football career.  In that case, John Wayne never scored a touchdown while playing for any university besides Yale; but we might feel compelled to point out that he actually played football at Harvard, and so our attempt to be a smart ass might pull us in two different directions (in each case, revealing that we know at least one university that John Wayne attended and at which he played football).

Clearly the question implicitly applies the condition that  John Wayne actually have attended and played football at the university under consideration.  My point is simply that it’s really, really important to ask questions about our questions.  This is a much more complicated discussion than I intend to indulge here, but I think it’s a huge philosophical (and practical!) problem when a test ceases to measure comprehension or aptitude unambiguously, and confounds them with the ability to divine the intentions of the questioner (i.e., knowing to reject my smart-ass answers to the trivia question, even though I’d have given brownie points to a student with the chutzpah to point out such a flaw on a test I gave).

I’m good at taking tests.  I’m pretty convinced I could pass most multiple choice tests, no matter how specialized the knowledge, if I had a couple of practice tests that I could use to study patterns, and maybe a few weeks to cram definitions and un-fakeable facts.  This isn’t a matter of genius or aptitude; it’s just one skill among many I have, although it happens to correlate positively with very valuable signals (e.g., high SAT scores).  It clearly can be practiced – witness the test prep industry that inspires ordinarily well-meaning, liberal-leaning, at-least-moderately-affluent parents to throw up the walls of privilege to get access to another edge over kids who can’t afford the same services.  (Actually, I think it should be mandatory to disclose to the College Board whether you have paid for test preparation services, but that is another polemic for another time.)

Because I’m good at taking tests, my default assumption is that it is the responsibility of the person receiving a question to give the correct answer.  It’s helpful to be reminded that there’s a corresponding burden on the questioner to make sure the query is unambiguous and that it will accurately elicit the information or verify the competency that is its intention.

P.S. To do some justice to CNBC for a change, I’ll make two brief observations.  First, I think some of their “CNBC Investigates” longform pieces (or whatever the analogue of longform journalism is, in television) have been solid, particularly the ones that chronicle the growth of enterprises like McDonald’s, or that acknowledge the real economic activity (and innovation) that goes on in illegal trades(illegal forms of gambling, drugs, etc.)  Second, I think Becky Quick is by far one of the most competent anchors on business television, mostly because she actually knows how to moderate discussions between speakers as opposed to constantly inserting her views in the form of leading questions (i.e., Joe Kernan) or, even worse, whining uncontrollably when a commentator points out that this is actually what she is doing (i.e., Erin Burnett – great clip to show how low financial journalism can go).

P.P.S.  It’s USC.  Fight on, Trojans!

Be it Resolved

January 3, 2011

The New Year’s Resolution is an entertaining ritual that is ripe for dissection by self-help gurus, cultural critics, and other miscellaneous purveyors of snark.  I don’t have much to add to the dialogue apart from noting that I enjoyed reading this catalog of the resolutions of creative luminaries.  Some were witty; others were predictably self-promotional.  Some showed an appealing depth or at least human-ness to an elevated and remote figure; others evoked a desperation for recognition and status, like a comically-oversized Rolex.

It’s pleasant to join the swell of momentum and purpose that we see in friends and strangers who commit to lose weight, eat better, save more, and finally tackle that pet project.  Often, what stands between a person and her resolution is simply a set of things that she already knows to do or not-do; only modest assembly required.  So, even the most jaded of us can indulge the fantasy that our ‘best life’ stands ready to be seized.  I truly hope that almost everyone achieves her goal for 2011, if only because I’d be thrilled to live among better-looking, more-solvent compatriots who have reached a greater state of peace and balance.  Yes we can!

When looking at the New Year’s Resolution from the perspective of the cognitive scientist or behavioral economist, all sorts of worthy questions emerge.  Why do we have, as individuals and groups, certain ‘time-inconsistent preferences,’ where our Virtuous Selves aspire to practices that our Future Actual Selves often fail to follow?  Why are our old habits so hard to break?  There is an emerging literature in this domain that may produce some interesting suggestions to ‘hack’ ourselves into greater compliance with our goals, although I suspect it’s more likely to confirm intuitions that have been endlessly rehashed.  (And I, for one, resolve to become credentialed as an ‘expert’ in something.)

There are exciting prospects, which I’m certainly not the first to observe (or, sadly, commercialize), for technology to help our Virtuous Selves assert control.  A food journal has always seemed tedious (must I really track all the ingredients in that salad?), unromantic (“pardon me, but can you ask the chef whether this is a six-ounce or eight-ounce filet of dover sole?”), and impractical (am I really going to carry a pad and pen everywhere?).  But why not take a quick photo of whatever I’m about to eat, which I sometimes do for fun anyway?  Even better, why not upload those photos for the periodic inspection of a trusted group of friends (or strangers; why not?) and give my auditors the freedom to praise or embarrass me for my choices?  There exist specialized apps and services to record workouts, expenses, sleeping habits, or whatever else one may care to monitor.  Certainly none of these are necessary, but they materially increase the convenience of measuring and managing oneself.

Make every day in 2011 count.  Just please don’t all to come my gym during my regular hours…