Peter Levin’s Rethinking Markets

January 31, 2008

Two dumb articles…

Filed under: Ramble — Peter @ 2:41 pm

I’m trying to decide which one is dumber, this article by Anne Applebaum on why there are only beautiful women in Russia post-Soviet Union, or this rock-stupid article in the NYT Times about how economists understand repugnance. While we can attribute the dumb in the former to a single person, the valuelessness in the latter comes in multiples - so it may be the author’s synthesis and story line more than those discussed therein.

Privacy, data, and the new Sociometrics

Filed under: Ambiguity, Technology — Peter @ 11:53 am

As always, Technology Review provides a great glimpse at the innovations coming down the pike. In this case, by innovation, I mean the continued ascendancy of sociological insight wrapped up in physics, taken up by engineering, and brought forward as the ‘next big thing’: you can actually identify people’s social networking in real-time and help them to, for example, work a crowd better; or find a more suitable financial broker; or see which institutional representatives interact with whom at an academic conference.

All else aside, I think we are approaching a new era of privacy issues, related to data mining and what counts as anonymity, what counts as data, who owns it, and who profits from it. The sociometrics model only works when we have things like smart-badges, ambient microphones, and unobtrusive surveillance. Alex Pentland, one of the MIT researchers (rightly) sees quite benign benefits from these technologies, including making non-face-to-face interactions more effective and efficient.

Transcripted from Alex Pentland’s website (.wmv movie link):

We can really measure exactly when you nod your head, and exactly the inflection of your voice, and exactly where you look, and all those things that you sort of know are important, it’s the social language. You can have a microphone that aims at different people and has a little bit of processing in there. We don’t listen to anything that violates privacy, we’re just looking at features of language. And that’s not particularly worrying to people because the words are never recorded, the meaning is never recorded. It’s really just social signals. ‘You were being pretty pushy there’. Or ‘You weren’t really being very forward there’. And we can combine that with measurements of performance to ask, how is it that your social presence affects your performance? Your working with other groups? And if we can do that, the evidence from the literature is that we can improve the working of groups, the functioning of organizations, by a lot. Not just 1 or 2 percent, but 20 or 30 or 40 percent. And of course, those are the things that drive profitability, that drive performance.

And it is indeed true that they are not recording words, or meaning, just social signals. But in an era where phone companies are data mining all voice and data activity, and financial firms are looking at aggregated transactions in the search for suspicious transactions (.pdf link), I would suggest that ‘just social signals’ are no longer a free resource. At minimum, we need a new language to capture what we used to, but no longer mean by anonymous.

And I’m not against what Pentland et al are up to, not by a long shot. I just think there are some issues that come into play that we’ve only begun to think about practically, and that we’ve not at all come to terms with theoretically or in the underlying social scientific research.

January 30, 2008

U2 is a process, not a structure

Filed under: Culture — Peter @ 7:16 am

Before the new U2 3d drives us all into fits of discussion over the relationship between art and commerce, let’s just take a step back to 1981, shall we? Note to self: shimmery droplets of water effects=good.

January 25, 2008

How do you know what you like?

Filed under: Art, Culture — Peter @ 8:20 pm

While partaking in a stupendous lunch, the conversation turns to the question of how do people know what they like?

Drinking deeply from his Effervecense de Pomme, PL chimes: There is a time in every man’s education when he arrives at the conviction that envy is ignorance; that imitation is suicide; that he must take himself for better for worse as his portion; that though the wide universe is full of good, no kernel of nourishing corn can come to him but through his toil bestowed on that plot of ground which is given to him to till. The power which resides in him is new in nature, and none but he knows what that is which he can do, nor does he know until he has tried.

Tipping her fork into her delectably deconstructed Nicoise Salad, JL rejoins: Not for nothing one face, one character, one fact, makes much impression on him, and another none. It is not without pre-established harmony, this sculpture in the memory. The eye was placed where one ray should fall, that it might testify of that particular ray. Bravely let him speak the utmost syllable of his confession. We but half express ourselves, and are ashamed of that divine idea which each of us represents. It may be safely trusted as proportionate and of good issues, so it be faithfully imparted, but God will not have his work made manifest by cowards. It needs a divine man to exhibit anything divine. A man is relieved and gay when he has put his heart into his work and done his best; but what he has said or done otherwise shall give him no peace. It is a deliverance which does not deliver. In the attempt his genius deserts him; no muse befriends; no invention, no hope.

PL digs into his Fuji Apple Tart: Trust thyself: every heart vibrates to that iron string.

Well, perhaps not quite so Emersonian, but our conversation did turn once again to experts, tastes, and professional critics - not just where preferences come from, but how do you know what you like? The example I favored (and favor) is cooking, which makes my point but does so at the expense of losing the social. Ignore that for now.

Cooks, it seems to me, resolve along a curvilinear continuum. At one are novice cooks. They rely on recipes, following them closely to make dinner. The novice cook relies on the tastes of the cookbook author, assumes (not unreasonably) that because this person is an expert, their combination of ingredients and techniques is a good approximation for what is going to be tasty.

At the other end of the spectrum are professional chefs. Professional chefs don’t rely on recipes as such - but neither do they rely on their own personal tastes. Or rather, their personal tastes at the point when they are professional chefs approximate the tastes of the field. Classical French, Northern Italian, Japanese. Their tastes conform to the field’s tastes, with variations due to creativity, syntheses of cuisines, and the like. But when a chef adds more star anise to a dish, it’s not so much that they personally like star anise, it’s that they believe that star anise makes the dish better. There’s a distinction there.

In the middle are those whose personal tastes figure more prominently than either the novice or professional. I call these the Grandma cooks - their recipes may have once begun their lives as recipes, but are now tailored to the tastes of themselves and their families. Grandma Sylvia puts in parnips rather than carrots because Jon won’t eat orange foods; her own tastes and the tastes of those people she cooks for matter more.

So this is the point: someplace between those who know nothing and therefore rely completely on experts; and those who are the experts, and whose tastes are oriented to a broader field; in between are those for whom personal tastes figure more heavily. I’d like to hypothesize that this characterizes a number of cultural arenas, including art (both buyers and maybe painters), music, and of course cooking.

Do you believe me?

The What - yet another post on unknown unknowns

Filed under: Ambiguity — Peter @ 10:16 am

Dave Egger’s last book is about one of the ‘lost boys’ of the Sudan, and its title is an inspiration:

God, pleased with his greatest creation, offers the first Dinka man a choice of gifts: on the one hand, the cattle, visible and known, an animal that can feed and clothe him and last for ever; on the other hand, the What. The man asks God, “What is the What?”, but God will not reveal the answer. The What was unknown; the What could be everything or nothing. The Dinka man does not hesitate for long. He chooses the cattle, and for thousands of years Dinka lore held that he had chosen correctly; the cow is thus sacred in southern Sudanese culture, the measure of a family’s wealth and the giver of life.
It was not until the torment of the southern Sudanese in the 20th century that the Dinka began to question this choice. What was the What, they wondered, and speculation about the answer abounded: was it technology? Education? Sophisticated weapons? Whatever the answer, it was assumed that the Arabs of the north - who, legend had it, had received the What - might have got the greatest of God’s gifts, and were using this What to inflict unending pain upon the southern Sudanese.
– Dave Eggers, What is the What?

(what is the What, after all?)

But this is only inspiration. I was moved by a passage about Michael Hayden in Grant McCracken’s Flock and Flow to look up an old New Yorker article. Written by Jeffrey Goldberg in February 2003, the article is simply breathtaking. It is a close look at the ‘unknowns’ at play in the then-looming Iraq invasion. Discussing the challenges of peering into intelligence, we reminisce:

“Rumsfeld is especially drawn to Schelling’s theory of surprise; he believes that surprise is often the by-product of analytical timidity. ‘The poverty of expectations - the failure of imagination - I found this just so interesting,’ Rumsfeld said. ‘We tend to hear what we expect to hear, whether it’s bad or good. Human nature is that way. Unless something is jarring, you tend to stay on your track and get it reinforced rather than recalibrated. If I as a policymaker fail to make a conscious decision that you want to go around three hundred and sixty degrees and test things, you’re likely to stay in a rut. And we’ve seen our country do that.’

Rumsfeld believes that one long-held belief among Middle East analysts is overdue for reconsideration: the idea that doctrinal differences prevent Sunni and Shiite Muslims, and religious and secular Muslims, from pursuing common projects in anti-American terrorism. This is a subject of great relevance today, because the Bush Administration contends that Baghdaad is a sponsor of Al Qaeda; critics of the Administration’s foreign policy argue that bin Laden and Saddam Hussein are natural enemies. ‘The argument is that Al Qaeda has got a religious motivation, somehow or other, and the Iraqi regime is considered to be a secular regime,’ Rumsfeld said. ‘The answer to that is, so what? The Iraqi regime will use anything it can to its advantage. Why wouldn’t they use any implement at hand?’”

The language Rumsfeld used to make these kinds of distinctions is ‘knowns, known unknowns, and unknown unknowns.’ Knowns are facts on the ground - hopefully true, more or less agreed upon. The known unknowns are uncertainties (for those in finance, Frank Knight’s work on Uncertainty, Risk, and Profit comes to mind). They are risks, in the sense that these kinds of unknowns can be sometimes resolved (via more information, or mobilizing troops) or at least propped up against (via financial hedging, or taking profits from, or calculating civilian losses from).

More interesting, of course, are the ‘unknown unknowns.’ The unknown unknowns are the What. The unknown unknowns are ambiguity. If uncertainties can be resolved or hedged, ambiguities can not be. The What is what’s inside the mystery box, it is the assumptions that frame the questions you ask, it is the failure of imagination and poverty of expectations. We have no good ways to resolve the What, the ambiguity. What we currently do is to transform the ambiguity into uncertainty: we challenge the assumptions that Al Qaeda is a natural enemy to Saddam Hussein; we create standardized SAT tests to capture and tame the diversity of student achievement; we make standards that distinguish outsider art from collectibles from Old Masters; and sometimes we rue our own lack of foresight and thinking in doing so.

The problem in a larger sense is that there is simply not a particularly substantively rational system to be able to know when you should go with the long-held beliefs, and when you should re-evaluate them. The unknown unknowns remain an unresolvable problem for decision-makers. In the Goldberg article, it is simply astounding how possible it could have been to re-evaluate the Hussein/Al Qaeda links but absolutely wasn’t. This doesn’t mean some people don’t do it better or worse. And there are great examples to suggest that the situation in 2003 wasn’t a What, but rather an already known. But as with the quant/qual finance people - Grantham’s desire to use quants 95% of the time, handing off to a human being when you reach the edge of a cliff - there is no good way to know when you’re faced with another uncertainty, and when you’re faced with the What.

PS: There are so many other gems in this article. So much of what was described as ‘true’ by interviewees, I mean what the hell happened to it? And this article contains a Who’s Who of completely discredited foreign policy analysts, all of whom were or are directors of the CIA, NSA, Department of Defense, Secretary of State. Finally, in what I imagined would be what I wanted this post to be about, but really deserves more attention, the now-director of the CIA, then director of the NSA Michael Hayden notes: “Our noise-to-signal ration is twenty to one, that one being something useful…Not necessarily tactically useful, just remotely useful. But even this is misleading, because it’s twenty to one after we’ve done all sorts of things to make it humanly intelligible. You have to collect, process, translate, move it down the funnel, transform it from noise into a signal, before you know if it’s useful.” SvN of 1:20. Such precision!

January 24, 2008

Is qual/quant hybridity possible?

Filed under: Institutional, Markets — Peter @ 1:04 pm

Jeremy Grantham, principal of GMO, makes an interesting point about quants in his 4th quarter letter to investors (free registration required):

The good old days of the domination of the first generation quant models, where you simply show up with three concepts – value, momentum, and discipline – are over. But, even more critically and, perhaps like career and business risk, out at the limits of arbitrage, is this need for judgmental overrides on rare macro events. Quants like to show off their discipline by marching off the cliff in rows (it is said, I hope apocryphally, that Shaka, the great Zulu Chief, marched an impi, or regiment, off a cliff to impress European observers and I hope it did). Well, in real life it would be nice to stop at the edge and say “I don’t like the look of this, perhaps my model missed something.” The extremely difficult objective is to maintain the advantages of quant discipline 95% or so of the time and hand over to a human being when you reach the edge of the cliff. You can imagine the problems in making this kind of phase change. But only by slowly overcoming this problem and integrating this hybrid approach into the DNA of the investment process can one aspire to being very effective investors in the long run.

His point is that the benefits to quantitative investing are mostly in the fatter part of the outlier events curve. Or, in the language of March and Simon, quants are better at exploitation that exploration. Qualitative investors (stock pickers, in Grantham’s language) by contrast are potentially more helpful when the models depart from reality. An ideal world would have a hybrid model of quals and quants.

But that almost never works in practice. In practice, a qual firm uses quants as showcases to show their ‘balance’, while quants use quals to demonstrate their creative flexibilities. The underlying problem is that the two styles at their best represent different (and incompatible) views of the world. If you believe that human behavioral frailty gets in the way of seeing financial facts for what they are, it makes it difficult to envision a world where a stock picker can accurately tell you when you’re running off a cliff. By contrast, quals are simply limited by human cognitive capacity, combined with all sorts of cumulative social contexts, to never be able ‘really’ know why they are right or wrong. Leaving money on the table is also a form of running off a cliff. Just a different cliff.

Or rather, in Grantham’s story, there is simply no way to tell which 5% of the time is going to be the time when quals are going to be invaluable.

There might be an answer is abandoning the (theoretical) notion of maximizing efficiency, in favor of a more Type I versus Type II error view of the world. A Type I error is a false positive, in this context to believe there is risk where there actually is none. This is the ‘leave money on the table’ problem - if you cut back on the amount of risk you take, effectively you are underperforming the ‘economically efficient’ horizon. Type II errors are false negatives, to believe there is no risk where there actually is some. This results in many more ‘Whoa, we should have seen this coming!’ kinds of mistakes, I think.

In short, there is a collective action problem at work, insofar as we are collectively trained to believe that maximization is desirable. I would guess that 95%+ of the problems of the financial system are not due to institutions shooting for returns of 3% over prime. It’s when we build a system based on 20% over prime returns that we always seem to create incentives to blow up.

Silk Purse, Sow’s Ear

Filed under: Culture — Peter @ 9:17 am

I suppose I’m not the first to make this point, but it seems to me that this argument comes up quite a bit:

If “capitalism” is taken to mean business administration, wealth accumulation, finance — “bulls . . . bears . . . people from Connecticut!”, as Seinfeld once put it — then one can imagine young people’s eyes glazing over. But the opposite of socialism isn’t “capitalism,” that shopworn Marxist term, but “the free market” or “the voluntary society” or, simply, “liberalism.” The great evangelists for the free market, from the classical liberals and Bastiat to Hayek and Friedman, wrote about [freedom] from coercion, individual autonomy, the rights of free association, and the like, not the mundane business of buying and selling. (Not that there’s anything _wrong_ with buying and selling.)

Leonard Rapping once took the pro-capitalist “new classical” macroeconomists (Lucas, Sargent) to task for framing their arguments in technical efficiency terms: “Many of the young and idealistic are attracted by the concepts of freedom and justice, not efficiency and abundance. Aside from their contributions to economic theory, Friedman and Hayek wrote powerful defenses of capitalism as a system that promotes liberal democracy and individual freedom. This attracted to their ideas many adherents outside of economics. The new classicals have no such agenda. They operate in the rarefied world of economic theory and mathematical exposition.”

My guess is that these Australian students have had some economics courses but have never read Bastiat, Mill, Hayek, Friedman, Rothbard, etc. etc. I take that as an indictment of their professors, not the market.

These classical liberal economists are indeed the silk purse of capitalism. The high road of capitalism is the freedom it conveys to all and the maximization of human autonomy.

The sow’s ear is the hard slog of both the lived reality and the current thinking about (capitalist-oriented) economics: that it is about efficiency, not about equity; that the hard work and unequal distribution of resources and rewards seems like a failure of imagination of how best to create a good, just society; that ‘the voluntary society’ is much better for the haves than the have-nots. In other words, it is not that capitalism has always been uninspiring and soulless. Perhaps it is that it is currently assumed to be wonderful and apparently defended (not necessarily by economists, I’m saying. By, say, the Federal Reserve Bank) on behalf of those who already benefit most from it.

Is it wrong to acknowledge the latter instead of always trying to shift the argument back to the former?

January 20, 2008

A fix for b-schools?

Filed under: Management Schools — Peter @ 3:48 pm

I don’t have much to add to this post by Grant McCracken, other to say that you could do worse than reading the whole thing.

Another name for random. Or luck.

Filed under: Institutional, Markets, Organizations — Peter @ 3:43 pm

An anthropologist attempts to explain variation in how investment banks fared in the current credit crisis. Gilian Tett argues that three elements account for it: 1) successful firms have hands-on management (meddlers); 2) successful firms have management who rose through the ranks via trading desks rather than sales or legal; 3) successful firms have a ‘culture of power’ whereby firm members see themselves as tied to the firm rather than the business line, which creates a culture of accountability.

Alternatively, Michael Lewis noticed the way that Goldman Sachs has profited by the dramatic increase in credit defaults. Effectively, someone higher up in the firm made a series of dramatically-large trades against the CDOs that everyone else (including GS) was creating, marketing, and purchasing. In other words:

Enter two smart guys who trade Goldman’s proprietary books to argue to the CEO and chief financial officer that the subprime market feels soft and that Goldman should short it. This they do, in such massive quantities that they more than offset the long positions in subprime held throughout the rest of the firm, leaving Goldman short the subprime market and in a position to make billions when it crashes. End of story.

And it’s a good story. But consider what it implies. Their own traders and salespeople in subprime mortgages and related securities had put Goldman in exactly the same position as every other Wall Street firm: long subprime mortgages.

The only difference between Goldman and everyone else was that Goldman had, in effect, an entirely separate enterprise, sitting on top of the firm, with the power to reverse the judgment of its own supposed experts in various markets. They were able to do this, apparently, without ever saying a word about it to their own traders. Instead of telling the fools trading subprime mortgages that they are wrong, and that they should unwind their positions, they simply offset their trades.

This does not imply anything about the management team, where they come from, or the firm’s culture. Instead, it describes a firm where higher-up risk managers have the ear of people in power, and this allowed them to cancel out the stupidity of the rest of their own firm.

Or, perhaps this is all a fancy way of saying that there is a huge amount of luck and randomness happening at the organizational level in perhaps the most important core sector of the contemporary economy.

January 19, 2008

Airplanes and Accidents

Filed under: Technology — Peter @ 8:40 am

Well, this was bound to happen. I mention an article tells us there haven’t been enough data points for airline crash investigators, and a plane crashes. As usual, it was a mix of tech and happenstance - apparently, on-board computers sent a demand for more power to the engines, but they did not respond. It’s interesting how so much detail is reported the inhibition threshold may have been set too high, and the engine pressure ratio gauge had failed. Information without informing.

The photos are eye-opening.

January 15, 2008

Insight from Meyer and Rowan to your Organizational Life

Filed under: Culture, Organizations — Peter @ 3:33 pm

In discussion with a colleague about how to strategically manage life in an organization, I was drawn into thinking about how cultural institutionalism would motivate a strategy. Most organizations have pretty positive stories to tell about themselves - if they didn’t, they have organizational commitment issues. My advice is simple:

1) Learn what the story is that an organization tells about itself.
2) Tell that story.

This seems trivial, and maybe in a sense it is. But if a university’s story about itself includes a commitment to great teaching, you will not succeed there by disrespecting teaching. You may not have to be a great teacher (i.e., there may be disconnect between an organization’s story and how it rewards its members), but you cannot believe that teaching doesn’t matter.

If an organization sees itself as putting customer needs first and providing an awesome user experience, even your justifications based on costs should be couched in terms of user experience and customer needs.

There is nothing cynical about this.

Data mining, airlines, precursors

Filed under: Technology — Peter @ 3:23 pm

Via the Washington Post comes an interesting article on data mining and the airline industry. Apparently, airplanes are not crashing enough for the airlines to be able to determine the sources and causes of accidents. That is, there is not enough variability in the outcomes (the last crash was August 2006) to do forensic analysis.

Instead, airlines are turning to ‘precursor’ anlayses, data mining a whole slew of events that have not led to accidents: unstabilized approaches, pitch rates at takeoff, pilot scheduling. The article suggests but does not detail the sheer number of variables and flights being analyzed, saying that Southwest has ‘mined data on more than 1 million flights’, but not really talking about what that means.

Organizationally, this is fascinating because so much more often we see organizations respond to events rather than trying to predict them. Or rather, as the vice chairperson of the NTSB put it, mining for precursors is like “‘reading tea leaves’ because it can require imagination to tie together incidents that don’t seem hazardous at first blush.” Arguably, it’s the imagination part that is so tricky in seeing what to make of precursors to mistakes and accidents. Even if you find them, often precursors only matter when they happen in conjunction (ie. in systems that are tightly coupled). So you can actually imagine a series of events that still would not result in a crash unless those events were temporally and organizationally tied together.

I would say that this is what we’re seeing now in the finance world, but it’s not. It’s worth another post, but there we’re seeing deliberate profit-seeking and many (though not nearly all or homogeneously) firms knowing that things could blow-up but not really caring.

h/t: Paul Kedrosky

January 13, 2008

Two forms of institutions

Filed under: Institutional, Markets — Peter @ 8:37 am

I’ve been thinking a lot about institutions lately, in light of my earlier post on check-lists and medical practices. I originally had in mind a post about how the Berger and Luckmann version of institutionalization at the more marco-level is about the crystallization of practices. So what check-lists are theoretically are the same as other kinds of models and technologies: they are congealed expertise. For good and for bad, technologies, models, and checklists act as an alternative to pure expertise and craft knowledge. To the extent that they become taken-for-granted, they become the cognitive institutions envisioned by B&L. This does not imply a break from creativity, or ’structure’ as the opposite of ‘action’ (insert Giddens here if you like). They enable creative action as well. They also preclude new action or mask the world sometimes, if the world changes but the knowledge remains stuck in a model or technology. But the point is that we can look at institutions broadly as congealed knowledge.

But then I ran across the recent news that Second Life is banning banks. The issue is that virtual banks offer interest, which can then be returned to depositors, but they do not offer protections of real-world banks. Because Linden Dollars can be exchanged for real dollars, SL banks can actually be sources of profit and loss in the real world. And now they’re being banned:

as of January 22, Linden Lab will be removing all objects that are related to in-world banking. Until then, the company hopes that the banks will settle their debts with residents as best they can, but if they are caught trying to operate after January 22, they will be punished by possible suspension, termination of accounts, and (*gasp*) loss of land. Legitimate banks that provide a government registration statement or financial institution charter will be allowed to continue doing business, as will entities conducting marketing or education.

No FDIC in real-life means no banking in Second Life. This is institutions in the more Douglas North, economic sense. Here, banking ‘institutions’ act as rules of the game, and the Linden Labs folks act as rules and structures of SL. And we might be witness to a singular event: a set of runs on virtual banks as customers line up to take their Linden Dollars out before 1/22.

What’s interesting is the power of real-world institutions to actually impinge on a made up reality. After all, SL could have been created with any number of rules and ties to real life. Or no ties at all, as there’s no ‘rule’ in SL that people who cannot fly in RL are also not allowed to fly in SL.

There’s good stuff in between these two visions of institutions. For instance, think about which sets of conventions and rules are reproduced in an SL environment and which are not. Physical laws are often ditched, but those pertaining to land and real estate are kept. Gambling was eliminated because it might have been subject to RL laws and regulations, but laws regarding appraisals and insurance of real estate are left out despite the centrality of those kinds of transactions.

In any event, I’m not sure that institutions are anything, but I do think there are some specific phenomena amenable to one or another institutional distinction.

January 11, 2008

The Fightclub of Underground Art

Filed under: Art, Culture — Peter @ 12:37 pm

That’s Tourettes without Regrets. But of course that’s not the punchline, it’s MC Jelly D that I want you to know about.

January 10, 2008

Organizational Complexity and the Checklist

Filed under: Technology — Peter @ 5:01 pm

The New Yorker has a great article on the effects of technology in emergency medical care, with findings that are worth drawing out more carefully. In particular, the article is about intensive care units, where extraordinary measures are taken to keep patients alive. The question the author asks is, what happens when increased organizational complexity leads to errors? And what do we do about it.

A familiar answer is specialization. And in this world, specialization works. Research findings suggest that putting an intensive care specialist on staff (in ICUs in Maryland at least) had the effect of reducing death rates in intensive care units by a third. But the more effective solution seems to be a rather mundane, analog technology: the check list.

The main proponent of checklists in ICU care is Peter Pronovost, and the article details a single arena of innovation, the IV line. The checklist here consists of: “(1) wash their hands with soap, (2) clean the patient’s skin with chlorhexidine antiseptic, (3) put sterile drapes over the entire patient, (4) wear a sterile mask, hat, gown, and gloves, and (5) put a sterile dressing over the catheter site once the line is in. Check, check, check, check, check.” This has two effects: 1) it helps with memory recall; and 2) it provides a minimum set of standards in a complex process.

The introduction of checklists in IV line procedures was pretty miraculous:

In December, 2006, the Keystone Initiative published its findings in a landmark article in The New England Journal of Medicine. Within the first three months of the project, the infection rate in Michigan’s I.C.U.s decreased by sixty-six per cent. The typical I.C.U.—including the ones at Sinai-Grace Hospital—cut its quarterly infection rate to zero. Michigan’s infection rates fell so low that its average I.C.U. outperformed ninety per cent of I.C.U.s nationwide. In the Keystone Initiative’s first eighteen months, the hospitals saved an estimated hundred and seventy-five million dollars in costs and more than fifteen hundred lives. The successes have been sustained for almost four years—all because of a stupid little checklist.

This begs the questions, why and in what circumstances is something like a checklist a useful organizational tool. What is it? Alex Pang thinks it’s about predictability, and the solidification of practices and standards in the form of a predictable document. I’m tempted to see this as standardization and to start to tease out when and where standardization works and doesn’t. My old friend commensuration seems not really to apply here.

Incidentally, the author Atul Gawande also wrote a great piece a year or so back on the Apgar score and its effect on childbirthing practices. Similar scene, but there the issue is only sort of a checklist - it was a quantification issue.

January 7, 2008

If it’s going to be that kind of party

Filed under: Culture — Peter @ 6:33 pm

Well, if we’re going all sociological and stuff, we may as well have Veblen stick his thoughts in the mashed potatoes…

Rival Goods

Filed under: Culture, Markets — Peter @ 4:35 pm

Now that’s a rival good.

Falsefiability

Filed under: Ramble — Peter @ 3:50 pm

This is a bit far afield of my own expertise, but I’m curious: if I predict that an event in the future is a causal outcome, but it was an event that has already occurred that was causal, how can I be proven correct or wrong? I’m thinking about Obama and the Democratic primary, Iowa/NH, and the Feb. 5 2008 primary. Fabio has made the case that Super Tuesday is the crux of the primary, though he’s certainly not alone. And the specific question is more interesting as a broader question of history, evidence, and causation.

Now, if someone else (Clinton or Edwards) wins on Feb. 5 and goes on to win the primary, it seems pretty clear that Feb. 5 would be at least more decisive than Iowa/NH if not completely decisive. But if Obama wins on Feb. 5 and goes on to win the nomination, does that mean that he won because of Feb. 5? Or because of his wins in Iowa/NH?

In other words, if I bet that Obama wins not because of Feb 5. but because of Iowa, and Bowers/Rojas bet that Obama wins because of Feb. 5, what would it take to win or lose my money? Obviously Iowa affects Feb. 5, so they are conjunctive determinants, but is there an actual methodological answer to this question? How do we know decisive, causal, historical events?

January 5, 2008

Could everyone stop using Google Analytics, please!

Filed under: Ramble — Peter @ 3:36 pm

I’ve noticed that whenever a site fails to load, it’s almost invariably because it’s hung trying to connect to Google analytics. I know there’s blog visitor-porn, but it is seriously obnoxious. Does it really matter how many people are visiting your site? Really? Really really?