Beyond ideology, revisited

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My recent post beyond ideology seemed to annoy people more than I expected.

I see “level 3 thinking” as cultivating emotional detachment from your political beliefs. I argue for detachment in The Three Languages of Politics. That means that if I choose to adopt the conservative position on an issue, I take a charitable view of those who take a progressive position or a libertarian position. I don’t want to demonize opponents. I don’t want to get so defensive that I cannot appreciate that my views might be wrong or at least questionable.

Off Topic: fantasy baseball post

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It’s March again, and my thoughts have already turned to fantasy baseball. I think that what I wrote last year pretty much stands up. A few additional notes:

1. Usually, what you want from your top picks is low down side. This year, there is an odd case. Giancarlo Stanton, after being traded from a pitcher’s park to the homerun-friendly Yankee Stadium, could, if all goes well for him, hit 20 more home runs than anyone else. Since he is not even in the top half of the first round in most drafts, he seems to me to have some upside. I am not saying that the upside makes up for the downside risk that he gets hurt or that he fails to even lead the league in home runs, but it will be interesting to see how he pans out.

2. The other thing that strikes me this year is that there are three catchers that interest everyone–Sanchez, Posey, and Contreras–and the rest of the catchers almost all fall to garbage time. In shallow leagues, often there is very little difference in performance between middling players and players you can pick up in garbage time. So it may make sense to spend the resources to get one of the popular catchers and settle for a couple of additional garbage-time players elsewhere.

3. I believe in thinking very carefully about the players I want on my bench. That means having a good idea of the players that become available in garbage time. It also means keeping in mind that an empty roster spot has value, particularly in auction formats when it gets to garbage time. Filling out your roster early in an auction is usually wrong.

4. Your bench strategy should align with your overall strategy. Or if your overall strategy is to seek value where it arises, then your bench strategy should align with what emerges.

Ordinarily, I like having a catcher on the bench, but if you spend money or a high draft choice on one of the top three catchers, then spending a roster spot on a second catcher is less appealing. Also, the first couple of weeks of the season, your number one catcher may not miss many games, so you could wait until the season gets going to pick up your second catcher.

Suppose your bench strategy is to go for hitters with upside, typically, young hitters you hope will have a “breakout.” then you want your starting lineup to be a mix of stars and lesser players, not a lineup that is so solid that your breakout can’t break in.

Or suppose your bench strategy is to go for a lot of pitchers, figuring that pitchers are volatile and you will sort out who is having a good year as the season progresses. Honestly, I have a hard time seeing the difference between starting pitchers that are ranked around twentieth best and those that you can pick up in garbage time. One reason to go for quantity rather than quality in pitchers is that you might want to bench pitchers when they visit Yankee Stadium or Colorado or go up against the Astros, Dodgers, or Cubs.

The Housing Market, 2008 vs. 2018

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Scott Sumner writes,

OK, if was obvious that home prices were wildly excessive in 2006, why is that not also true today? Nominal house prices are now far above 2006 levels, and even in real terms they are rapidly approaching the 2006 peak

My thoughts:

1. Housing starts have been in the toilet for a decade. Looking at these charts, single-family housing starts were at an annual rate of over 1.2 million starting in 2001, and they were over 1.6 million from 2003 through 2005. Single-family starts plummeted to around 500,000 per year from 2008 through 2012, and they barely topped 800,000 last year.

Over the last decade national average rental costs have risen faster than inflation. As I recall, they were rising more slowly than overall inflation from 2001 through 2007.

In short, compared with 2006, high housing prices today look more like a supply problem and less like a bubble.

Update: Commenter Handle points to the price/rent ratio chart, which clearly tells you that we are not at 2008 levels.

2. The U.S. has multiple housing markets. Looking at the Core-Logic price index page, the cities that have seen big price increases in the past decade include San Francisco, Boston, Denver, and Seattle. San Francisco and Boston are notoriously supply constrained. Denver and Seattle also are more likely experiencing long-term increases in demand relative to supply. The “sand states,” where housing performed the worst during the crisis, have lower prices than they did ten years ago, in some cases much lower.

In short, today we are seeing high prices in areas where income growth has been very strong. In 2005 and 2006, we saw higher prices driven by looser credit conditions.

Me vs. Nassim Taleb

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As Tyler Cowen noted, Taleb takes on some of his reviewers. In a comment, I took on Taleb when he wrote

the variance within forecasters is smaller than that between forecasts and out of sample realizations.

He saw it as a sign of forecasters copying other forecasters. I do not think that this is necessary as an explanation. Unless you are adding noise to your forecast, your forecast should always have less variance than what you are trying to forecast. And it would not surprise me to see a range of forecasts show less variance than the range of subsequent outcomes. I wrote,

That is what you could expect. Suppose that the variable you are trying to forecast, Y, has a set of known determinants, X’s, and a set of random determinants, e’s. People should forecast conditional on the X’s, and the range of forecasts should be narrow. But the range of outcomes relative to forecasts depends on the e’s, and so the out of sample realizations could (and often should) have a wider variance

As usual, in your comments, please avoid making generalizations about either Taleb or me. Speak only to the specific issue that I raised.

Mis-measurement and Mis-leadership

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My latest Medium essay, called Mis-Leadership and Metrics. An excerpt:

Instead of holding teachers accountable to a centralized statistical office, I believe that teacher evaluation should be undertaken by peers, principals, and parents. Test scores can be unreliable indicators for many reasons. Parents can readily assess whether a teacher is working conscientiously and effectively.

I have only started reading Nassim Taleb’s latest book, Skin in the Game. But I gather that he would make the point that when it comes to children’s education, parents have real skin in the game. If I allow my child to try to learn from a bad teacher, I suffer from that. If a bureaucratic system fails to remove a bad teacher, the designer of the system does not suffer consequences.

And of course I mention Jerry Muller’s book.

Nassim Taleb’s latest

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I have just started reading Skin in the Game. Not far enough into it to have much to say.

A couple years ago, I had lunch with a friend, and somehow the subject came up of what I thought were my weaknesses. I think that I am not good at what people call “networking,” or cultivating useful contacts and taking advantage of them. I said that the one period in my life I did that well was when I started my Internet business. My friend asked why I was able to do it then.

I replied that I was motivated. In Taleb’s terms, I had skin in the game. It wasn’t just money. I had something to prove to former colleagues who said, “Kling has ideas, but he doesn’t know how to implement.”

I made a conscious decision to network. But I did not say to myself, “You are bad at networking. You need to work on it.” I just knew that it was something I had to do, so I just went ahead and did it as if it were a natural skill.

Both before and since, networking has not been a necessity in my life, and I have not done it. I can see now that some of the things that I tell myself I want, such as more speaking opportunities or wider influence, would be enhanced if I did more networking. But I am not sufficiently motivated to really change.

Beyond ideology

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Nat Eliason wrote this essay. If you are a Medium subscriber, you can applaud for it here. A random excerpt:

You might say “but I don’t want to read political philosophy.” That’s fine, but then don’t pretend that you’re interested in politics. If you want to watch the news but you don’t want to read some John Rawls, then you don’t actually care about politics: you just like feeling outraged and talking to your friends about how stupid/brilliant Trump is.

Another random excerpt:

Emotional reactions to an idea indicate that you have a Level 1 or Level 2 ideology around that idea. If you feel any emotional pull to defend Democrats / Republicans / College / Christianity / Bitcoin / Crossfit / New Gender Pronouns / Income Inequality in the face of new information, that’s a sign that you’re at Level 1 or Level 2 thinking.

I had a positive emotional reaction to the essay. So perhaps I have not reached Level 3 in thinking about it.

Aggregation, not paywall AI, is the answer

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Shan Wang writes,

The [Wall Street] Journal has found that these non-subscribed visitors fall into groups that can be roughly defined as hot, warm, or cold, according to Wells. Those with high scores above a certain threshold — indicating a high likelihood of subscribing — will hit a hard paywall. Those who score lower might get to browse stories for free in one session — and then hit the paywall. Or they may be offered guest passes to the site, in various time increments, in exchange for providing an email address (thus giving the Journal more signals to analyze). The passes are also offered based on a visitor’s score, aimed at people whose scores indicate they could be nudged into subscribing if tantalized with just a little bit more Journal content.

Pointer from Tyler Cowen.

I think that the future of paywalls is aggregation, not artificial intelligence. Spotify is an aggregator. It works better than having individual recording companies set up and manage their own paywalls. Maybe Amazon Prime will become a news aggregator. It already has access to the WaPo (gee, I wonder how it got that?). Facebook is a news aggregator.

The WSJ should get together with the NYT and other major publications to create a news aggregator. I have been saying that for twenty years, but the legacy media won’t do it. Pretty soon they won’t have much choice. Aggregate or be aggregated.

The Economics of the Peter Principle

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Alan Benson, Danielle Li, and Kelly Shue write,

Using detailed microdata on sales workers in US firms, we provide the fi rst large-scale empirical evidence showing that fi rms prioritize current performance in promotion decisions at the expense of promoting the best potential managers. Our fi ndings are consistent with the “Peter Principle,” which, in its extreme form, states that fi rms promote competent workers until they become incompetent managers (Peter and Hull 1969). In particular, we show that high-performing sales workers are more likely to be promoted, but that prior sales performance negatively predicts managerial performance, even after accounting for selection into the sample of promoted workers. These results suggest either that fi rms make mistakes in their promotion decisions or that the incentive befine ts of promoting based on sales performance justify the costs of promoting workers with lower managerial potential. We provide supportive evidence for the latter possibility by showing that fi rms appear to actively manage the trade-off between providing incentives and promoting the best potential managers: fi rms place less emphasis on sales performance in promotions where managerial roles entail greater responsibility and where sales performance is also rewarded by relatively strong pay-for-performance.

The latter paragraph suggests that there is a sort of a Peter Antidote. That is, give meaningless promotions as a reward for performance, but not when you are really counting on someone to be a good manager.

Keep in mind that putting people into positions where they will fail is going to hurt profits. Sooner or later, firms that put the right people into management positions will out-compete those that don’t.

Thanks to a reader for the pointer.

Off-topic: Laura Lippman’s latest novel

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It is called Sunburn. I got to it because it was praised in reviews and because its setting is a town on the way to the beach where we vacation every summer. She calls the town Belleville, but I assume it is Bridgeville, which we have occasionally driven through but more often bypassed. I am less than half way through.

I would describe the novel as a literary strip-tease. Each chapter is short, and you learn new aspects of the characters bit by bit, chapter by chapter. It turns out that the main characters are shady, wanton, violent, and deceptive.

For me, the trouble is that nothing about the characters is alluring, so that I am not captivated by the strip-tease. My guess is that I am going to bail out before the show is over.