Category Archives: books and book reviews

What I’m reading

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I was sent a review copy of A Crisis of Beliefs, by Nicola Gennaioli and Andrei Shleifer (henceforth GS). They say that the financial crisis of 2008 illustrates a theory of expectations formation in which market participants both place too much weight on recent news and in some circumstances ignore tail risk.

We know from Tetlock, whose name does not appear in the index, that a good forecaster puts a lot of weight on baseline information–characteristics that are more universal and permanent. Inefficient forecasters instead tend to focus on information that is more recent and local. GS argue that financial market participants are inefficient forecasters.

So far, what I like about the book:

1. The writing is clear.

2. Years ago, I contrasted two classes of theories of the 2008 financial crisis. One I called “moral failure” and the other I called “cognitive failure.” The theory that GS builds falls within that latter class, which is the one on which I would place more weight.

3. GS take seriously data that comes from surveys of the expectations of market participants. They are not afraid to find fault with the rational expectations hypothesis.

What I don’t like:

GS use standard economic modeling methodology, as opposed to Bookstaber’s agent-based modeling. See my review of The End of Theory. In particular, I think that institutional details are important, and Bookstaber’s rich depiction of different classes of market participants is better than a standard mathematical model. Also, I don’t like the idea of collapsing divergent expectations into a single representative agent. Getting away from the representative-agent model is a point in favor of Frydman and Goldberg. Note that Bookstaber, Frydman, and Goldberg do not appear in the index, either.

Why I favor vouchers

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Naomi Schaefer Riley writes,

When it comes to the role that teachers’ unions play in the problems of public education, Mr. Duncan doesn’t pull his punches. Upon taking charge of the public schools in Chicago in 2001, he discovered (with the help of the Chicago-based economist Steven Levitt ) that at least 5% of the city’s teachers were helping their students cheat on standardized tests. He was appalled but felt stymied: “If I’d asked Mayor [Richard] Daley to fire 5 percent of all Chicago teachers, then there would have been hell to pay.” The episode is emblematic beyond its particular circumstances: In what other profession is it acceptable to retain people who you know are falsifying results?

She is reviewing the memoir of President Obama’s first education secretary, Arne Duncan.

You will not find me arguing that charter schools do a better job than government schools when it comes to creating better long-term outcomes for students. The Null Hypothesis would say that neither does a better job.

My concern is with the distribution of power.

I live in an area where the collective “bargaining” table has the teachers’ union on both sides. The union controls the election of the officials with whom it “bargains.” The consequences are an enormous cost to taxpayers relative to the number of actual classroom teachers. The big winners are retired school personnel, non-classroom staff, and teachers who would otherwise be recognize as not fit for the classroom and fired, rather than given administrative jobs.

As a matter of principle, I believe that parents should have the power of choice when it comes to their children’s education. For any product, I want sovereignty for consumers, not for the supplier. Consumers will make mistakes, but I prefer the mistakes of consumers to the mistakes of government.

If we stopped sending taxpayer money directly to schools, then I don’t think we need to give vouchers to every parent. I would prefer to see voucher money concentrated on the neediest families, where need relates to income and the specific problems of some children.

Tyranny of Metrics Watch

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Frances Woolley surveys a lot of the literature on “outcomes-oriented” education.

In sum, learning outcomes are a relatively new approach to motivating good teaching. Yet, to the extent that they will succeed, it will be in old-fashioned ways: by persuading faculty members to sit down and have conversations about curriculum, teaching, and student assessment, by giving instructors feedback on their teaching performance and methods, and by mandating the teaching of core skills. Yet, in my experience, even achieving these minimal goals for a learning assessment process will not be easy, because of the structural rigidities within the university system.

Jerry Muller would have something to say about the outcomes approach.

TLP watch

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A kind review from Tristan Flock.

In The Three Languages of Politics, Kling argues that to understand our political opponents, we need to update the way we frame disagreements. Liberals, conservatives, and libertarians each have their own tribal language, which often baffles and infuriates outsiders. Until we grasp the nuances and assumptions of each language, mutual understanding is impossible. Fortunately, Kling provides a simple framework for making sense of these semantic differences.

My review of Lilliana Mason’s book

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The book is Uncivil Agreement. I conclude,

Consider the persuasive case she builds that citizens’ political behavior is driven primarily by group emotions and tribal loyalty. This would seem to me to support a libertarian view that a better society is one in which most decisions are kept out of the realm of politics altogether. Making good choices is hard enough even for the most rational of centralized decision-makers. If the underlying political behavior is not even rational to begin with, then the prospects for beneficial government intervention must be even more remote.

I thought that the political psychology in her book was very consistent with what I wrote in TLP.

Here is an interview of Mason by Ezra Klein, which struck me as very worth a listen. Neither of them seems to have found that the research moves them in a libertarian direction.

So far, the book still ranks at the top of my list of non-fiction books of the year.

My Recent Reading

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a. Jeffrey Pfeffer’s book, Power. Nothing really stuck with me, other than a brief passage pointing out that autonomy and power are not the same thing. If you want autonomy, you may not want to pursue power.

b. Ichiro Kishimi and Fumitake Koga, The Courage to be Disliked. I found this to be one of the most interesting self-help books that I have read, but I am still not sure whether I find it useful. Some notes:

1. Rather than suggest seeking power, the book offers advice to stay out of power struggles.

2. The book credits all of its ideas to the psychology of Alfred Adler, but you won’t find much in common with other summaries of Adler’s work. Very different points of emphasis, if nothing else.

3. There is a brief but very pointed passage stating that “You don’t know what it’s like to be ____” is a power play, and an ugly one at that.

4. I didn’t find the book immediately relevant to any problems in my life. Possibly I do not have the sorts of problems that animate the book. Possibly I fail to recognize that I have the sorts of problems that animate the book. Possibly the hard part of applying the book’s advice is acknowledging that your problems fit its thesis.

5. I think it would be a very interesting book to discuss, if my readers would like to do so.

Subscriptions and durable goods rental

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In the WSJ, Philip Delves Broughton reviews Subscribed by Tien Tzuo with Gabe Weisert.

Husqvarna, the Swedish maker of forestry and garden tools, maintains what it calls the Husqvarna Battery Box out of a Stockholm parking lot. The handyman’s hut offers subscribers access to hedge trimmers, chain saws, leaf blowers and other equipment; users pay a flat monthly fee to borrow the tools and return them when they’re done.

My guess is that a central issue in these sorts of businesses is pickup/delivery/installation logistics. Take the yellow, green, and orange bicycles that lately I have seen strewn around the area. I suspect that, on average, the users of this bikes disperse them to less convenient locations than where they pick them up. That leaves the company with the task of going around and retrieving the bikes and moving them closer to where people might want to start biking. I doubt the business model in that case.

Jeffrey Pfeffer on leadership

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I watched the video of his Google talk on his book Leadership BS, where he was interviewed by Karen May, who I think functions in management development at the company. Several take-aways:

1. Management advice is a field filled with baloney sandwiches, which can be defined as opinions not backed by any statistical evidence. Pfeffer is very strong on that point.

2. There is an inherent tension in leadership between doing what is best for the leader’s career, doing what is best for organizational success, and doing what is best for employees. You can never attain perfect alignment of those.

3. Intellectual curiosity is an important but all-too-rare trait at high levels in a company. One symptom is that many executives do not read any books at all.

About minute 32 or 33 of the video, in the midst of all this talk about the need to be evidence-based and scientific rather than base leadership behavior on hunches and anecdotes, Karen May says that Google prides itself on looking at evidence and data in its management approach. The video was shot in November of 2015. Since then, we have seen James Damore fired for exhibiting these traits. Which relates to another take-away:

4. Hypocrisy is pervasive in the workplace, as Robin Hanson could have told you. Pfeffer points out that what leaders say they value and how they actually behave are not necessarily aligned. So before you believe “How to work with Arnold” you should do some due diligence and talk to people who have worked with me.

By the way, here was my route to the Pfeffer video:

The Medium site suggested to me that I would like Ryan Holiday’s list of book recommendations, so I checked it out. These recommendations included Robert Greene’s 48 Laws of Power. I was intrigued by the Kindle sample, but not convinced to buy it. So I researched Greene on Wikipedia, and I found a Wikipedia page on that specific book. The Wikipedia article included a quote from Pfeffer complaining that the book was not evidence-based. So then I looked up Pfeffer. I am going to investigate Pfeffer’s book on power. Meanwhile, when I Googled Pfeffer, I found many YouTube videos. So far, I have only watched the one.

How to work with Arnold

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Stripe Press has launched, with a book called High Growth Handbook, by Elad Gil, about taking a successful start-up through the stage where it has hundreds of employees. Books scheduled for later release include one from Tyler Cowen and a revised edition of Martin Gurri’s Revolt of the Public that includes a forward from yours truly.

I liked parts of Gil’s book. It focuses on an interesting phase for a business–not a start-up, not mature, but in the process of growing from sub-Dunbar to super-Dunbar, from a tribal band to a Weberian bureaucracy.

But I would have been much more demanding as an editor. I would have gotten rid of all the advice that I think is non-actionable, “Make sure you hire a ____ who is smart.” “Don’t do too little X, but don’t do too much, either.” etc. On some topics, I would have pressed for more specific examples, as when the author interviews Patrick Collison, who says

some of these companies–by no means all, but some of them–are in the process of making either major cultural or organizational errors

You don’t have to name names, but at least describe one or two of the types of errors you are talking about.

In fact, I would have asked Gil to devote more discussion to companies that failed in the high-growth phase. What went wrong at MySpace? Netscape? AOL? Napster?

There are some actionable ideas in the book. One of them is for an executive to circulate a document that describes “how to work with me.” If I had thought of doing something like this back when I was in business, here are some things I could have written, some to communicate with my supervisor, some to communicate with people working for me:

1. Don’t give me too many things to do at once. I need to feel like I have my work under control.

2. If you want me to do something that requires my utmost concentration, let me work on it in the morning.

3. If you want me to do something that I hate doing, find someone else to do it.

4. I often give vague project assignments. Push back with clarifying questions, until you know what to do or until I back off because I realize that I don’t really know what I want.

5. When I give a deadline, it is the last possible moment to complete a project. When you miss a deadline, I am devastated. When you just make a deadline, I am disappointed. Get it done sooner.

6. I hate it when people focus on assigning blame. When something goes wrong, focus on fixing it.

7. I like sharing interesting articles and books that I come across. Feel free to do the same with me.

8. I believe in hiring people for attitude and ability, not for experience.

9. The key attitude is being oriented toward solving problems rather than just complaining. I will not tolerate a chronic complainer.

10. I’ll let a software developer get away with being a prima donna*, if you’ve got the right combination of ability, conscientiousness, and stamina. Show me you can really get stuff done, in which case I’d rather keep you happy and let other employees get annoyed than the other way around.

*I define a prima donna as someone who thinks that their superior talent demands recognition and special treatment

Vacation in the Canadian Rockies

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I was away for a couple of weeks, and I left behind scheduled-ahead posts for that period.

1. I usually have about a 3-day lag between writing and posting, but the lag was longer during the vacation. Also, I was frequently without Wi-Fi or cell service, so I could not keep up with comments well at all.

2. The Canadian Rockies are justifiably a bucket-list destination, although my wife and I don’t maintain a bucket list. We enjoyed the secondary sites much more than the main tourist attractions, in part because the latter were uncomfortably crowded.

3. We could really feel the emergence of the middle classes of East Asia and India. The proportion of tourists from those areas seemed roughly comparable to their share of world population. You will know that Africa and Latin America have developed when you can say the same thing about tourists from there.

4. I thought about sex a lot. No, it’s not that kind of a vacation spot. But the one book I read was Mona Charen’s Sex Matters, which is a critical history of the feminist and sexual revolutions. Now that I have sorted out my own thinking about the battles of social norms concerning sex, I have a new essay on the topic.