Datapile (n): A raw set of data downloaded from a human-entry computer information system.
Pile, in this case, is an oblique reference to excrement. A run-of-the-mill datapile, after all, is often indistinguishable from a pile of shit.
Housing
The question that I don’t have a really good feel for is to what degree the housing market is a canary or millstone. Being only 5% of the economy, one is of course inclined to think of it as a canary.
But here’s the thing: Residential construction companies employ a lot of relatively casual labor. A lot of unskilled labor. A lot of the kind of labor that is, RIGHT NOW, unemployed.
The question then is what the marginal impact of a decline in the housing market might be. One thing’s for sure, anyway. That market is completely effed right now:
In New York we’re noticing some serious signs of the residential and commercial real estate markets recovering (our rent is going up and our expanding office is having some trouble finding a home).
One can take this to mean different things. One interpretation is that there is some serious regional variation contained in these graphs, which appears to have some weight
Another possibility is that I don’t know what I think I know because most data is actually just BS.
The problem with new Keynesian economists is that they believe the government data for inflation, real wages, etc, actually measures the theoretical concepts that the model tries to address. But they don’t. Even NGDP is far from perfect, but at least it’s not as distorted as the CPI.
That’s Scott Sumner defending his use of NGDP because it’s the least BS stat out there. I’m heavily persuaded by this kind of argument. A little while ago, I posted something similar to this and actually got into a comment discussion, which is a rather novel thing for me here.
I feel like educated folks tend to make decisions with the part of their brains they trained in school, the part that’s wired for analysis on a given dataset and coming up with The Right Answer is the challenge.
Big contrast to real life. If you had described my job to me when I was a student, I’d imagine myself slogging through difficult math and trying to figure out how to optimally process a dataset. No so. In fact, I’m not sure I’d really want that job or be anywhere near as good at it as I feel I am at this one.
I actually spend about 75% of my time trying to figure out whether this steaming datapile is in ANY way useful. The analytical part is usually pretty straightforward. It has to be. Heck, the rest of my job is trying to shoehorn this datapile into an analysis everyone can understand instantly.
Clients are distracted, busy people and they’d say my work is important but they are often juggling a lot. My complexity test, therefore, goes like this: can this analysis be explained to a child?
And that’s as it should be. Fancy models have their place, but only when used to support conventional wisdom and gut instinct. Counter-intuitive, Complex and Useful: pick two.
I often get the feeling that macroeconomics in particular is a bit too counter-intuitive for its own good. Practitioners get wrapped up in their models and don’t spend quite enough time understanding exactly what is and is not BS. As a result, they have very weak intuition. I suspect they’d be pretty freaked out if they went down to the sausage factory and had a look.
Lat/Lon Distance Excel (Spherical Law of Cosines and Haversine Formula in Excel)
I can’t find this in one place anywhere, so I’m putting it up here:
Here’s the Haversine Formula in excel. Make sure the lat and lons are in radians (multiply degrees by pi/180)
cellx=SIN((lat2 – lat1)/2)^2+COS(lat1)*COS(lat2)*SIN((lon2-lon1)/2)^2
celly=2*Atan2(sqrt(1-cellx),sqrt(cellx)) // big trick here is that ATAN2 is reversed in Excel relative to most programming languages. Beware!
answer=celly * 6371
And the spherical law of cosines (same deal for radians. Don’t use degrees!):
=ACOS(SIN(LAT1)*SIN(LAT2)+COS(LAT1)*COS(LAT2)*COS(LON2-LON1))*6371
I’ve found the the spherical law of cosines does the trick for just about anything and is nice to have in one formula. Not that you couldn’t do the Haversine in one line, but it would be tough to look at.
___
Addendum: here’s the full excel Haversine formula in one line:
distance = 6371*2*Atan2(sqrt(1-(SIN((lat2-lat1)/2)^2+COS(lat1)*COS(lat2)*SIN((lon2-lon1)/2)^2)),sqrt(SIN((lat2-lat1)/2)^2+COS(lat1)*COS(lat2)*SIN((lon2-lon1)/2)^2))
___
Addendum 2: and here’s a google sheet you can use (and download to excel). And here is the youtube video explaining!
The Demographic Crunch
I still don’t really have a great feeling for WHY it is that a demographic transition is toxic to economic growth. I very vaguely feel like it has something to do with younger people being more productive in society, something that I’ve heard referred to as the demographic dividend.
But what on earth does that mean?
Here’s Frances Woolley. Woolley’s point is that a generation’s quality of life once they reach ‘retirement’ age is determined by the age distribution of society behind them. I’ll paraphrase: panic if you’re anything like China when two generations of one-child policy leave a nation of grandparents with 1/4 a grandkid each and nobody to take care of them.
She also discusses the problem of where one puts one’s savings. When you save, you’re saving with everyone else and raising asset prices. When you dissave, you’re liquidating with everyone else and lowering asset prices.
In other words, if you’re a boomer that saved during your 30s-50s, you were destined to buy high and sell low. I’d love to read a paper that discusses the recent stock and housing bubbles in that light. I’m sure it’s out there.
Anyway, all this presupposes that older people retire. What if they don’t?
My grandfather retired in the late 70s as a college administrator/teacher and his life divides neatly into three: a third before his career (includes WW2), a third as a worker and a third retired. As a retiree with an indexed pension, he claims to enjoy the highest standard of living of his life. All guaranteed by the state and funded by the demographic dividend.
As those kinds of deal evaporate, workers will extend their working lives, particularly given the buy high sell low saving environment.
Are 60-year-olds as good as 25-year-olds at output and innovation?
Let’s think about possible historical analogues. Hey, what about Japan? Hm…
Here’s Michael Pettis:
On the other hand if the definition of poor demographics is extended to mean a wide variety of demographic conditions that hurt economic growth, there is nothing especially Japanese about Milligan’s list of Japanese symptoms. They are pretty standard for countries undergoing financial crises.
Great quote here, too:
Japanese households on the other hand continued to do better, year after year, after the crisis, the difference being that their wealth increased more slowly than reported GDP before 1990 and increased more quickly than reported GDP after 1990.
So, at best, the causes of Japan’s malaise will be difficult to disentangle from its debt hangover.
And here’s another blog post by Tino that I think I’ve referred to before:
Between 1990-2007, GDP per working age adult increased by 31.8% in the United States, by 29.6% in EU.15 and by 31.0% in Japan. The figures are nearly identical!
Japan has simply not been growing slower than other advanced countries once we adjust for demographic change.
So a demographic transition only cause a mismeasurement of GDP growth and not an actual decline in living standards, which IS the result of a debt crisis. But this mismeasurement only occurs to the extent that the Frances Woolley effect dominates (i.e. people just stop working). If they keep at it, nobody loses.
These conclusions contradict the wikipedia article’s phrasing of the demographic dividend, which it suggests is driven by the share of “working age people” in a population, as opposed to the share of workers in a population.
There has to be some empirical work out there on this.
Mayweather vs. Ortiz: Hope For Boxing
Here’s the NYT on Money Mayweahter:
Mayweather, regarded as one of the best boxers in history, fights under a highly unusual financial structure, exchanging upfront risk for back-end profit while retaining total control. He is even responsible for paying his opponent, in this case a business expense of at least $2 million…
In his previous four fights, Mayweather earned $115 million. For Saturday night’s event, he is expected to make about $40 million, and the checks will come for years, determined by the results of many things beyond the fight itself, like the gate and the pay-per-view television numbers.
The Superstar Phenomenon means the brightest stars will be ‘bigger than the sport’. This is a tired phrase, but I think it has real meaning in boxing, where an athlete can supplant the entire organizational power structure and, effectively, ply his trade independently. Mayweather can and does regularly.
‘Bigger than the sport’ does not describe, say, LeBron James or Roger Federer or Tiger Woods (ok, these examples are all from 2008 but stay with me). They cannot quit dealing with the NBA or the ATP or PGA and remain relevant. There’s a powerful force that keeps these superstars in the fold: Monopoly.
Fans want the best to compete with each other in an unbridled athletic competition; ironically, financial and organizational competition (i.e. capitalism) prevents this. Multiple organizational bodies (‘leagues’) compete by holding their athletes hostage. They say to each other: together we can give the fans what they want: superfights, superbowls and world-super-grand-mega-intercontinental undisputed championships. Apart the pie is smaller. So let’s cooperate!
But these aren’t your grandfather’s competing organizational bodies. The AFL and ABA deliberately pursued a strategy of selling their Pepsi recipe to Coke. They wanted to cash out.
But because there is no dominant player in boxing, nobody blinks. The economic model is a classic prisoner’s dilemma where nobody plays nice.
I wish I could measure it, but my feeling is that casual fans’ interest in boxing is weak for smaller fight and increasing for personality-driven superstar bouts. This means that promoting bodies are banking concentrating their resources on those superstar bouts. They need these fights bad and Floyd’s nicking their lunch.
A potential way around this is the UFC (monopoly) model. You know what I notice most about the UFC ? Small records and young athletes.
Guys don’t have 30-something fights before they hit the big time. And once you hit the big time, the lights shine on you until someone knocks them out.
Boxing promoters have this tendency to milk a superstar cash cow by setting up weak fights with plausible contenders insiders know can never live up. This cements the superstar as The Best ($ka-ching-ching$), while the real contenders languish. A lesser sport (and SMALLER PIE, I shout from the rooftops) is the result.
There are signs that the other superduperstar in boxing is getting his (business) act together. If Paquiao can duplicate Mayweather Promotions and the next superstar after that follows suit, my hope is that the promoters (the sanctioning bodies are laughably irrelevant) will collude to destroy the superstar model.
Tournaments. Younger stars. More stars.
Starve the beast.
Mothers Of Two Are Just Like Action Heroes
Here is Tyler Cowen quoting Matt Yglesias:
I was always struck in college, watching people head off into the field of finance, by the mismatch between the demographics of the folks who’d go be bankers and the stated desire to manage risk. If I’m conjuring up in my head a vision of a prudent risk manager, I’m thinking maybe a mother of two. Someone smart, of course, but also someone who’s cautious. Someone who sees the whole field. Someone who juggles. I’m not thinking “young smart arrogant dude with limited practical experience and a burning desire to get ahead.” That to me sounds more like a rogue trader!
Here is the whole Yglesias post, which doesn’t add too much.
MY metaphor of choice is action movie heroes.
The ultimate action hero doesn’t fear anything. You can torture him, you can threaten him, you can do what you like and he won’t give you the nuclear codes no matter what! He is, dare I say, a bit of a rogue.
But suddenly the evil villain cackles ominously and, oh look! From behind a secret door comes the buxom female lead our hero has been pillaging for the last few days and may or may not have feelings for despite his gruff exterior! And she’s precariously perched above a shark tank! I thought he told her to stay by the beach with the boat and wait until midnight!?
Gasp! He’s been had! And the nuclear codes are given up.
Mothers of two aren’t the only people with something to lose. Even rogues have weaknesses that can bring them into line.
Let’s Flip This Around
Here’s the conclusion of a Barker-linked paper:
Corporations listed in Fortune’s “100 Best Companies to Work For in America” had equity returns that were 3.5% per year higher than those of their peers, indicating that employee satisfaction correlates positively with shareholder returns, says Alex Edmans of the Wharton School.
more here.
A friend of mine once told me that every single one of these ‘puff lists’ is compiled with extreme cynicism. The point is to check very carefully for potential bias by asking questions like: who has compiled this list and what companies would yield maximum benefits for this author? Are those the same companies as the ones on the list?
It doesn’t surprise me that these puffed up companies are the most profitable ones: those are the companies that are the highest value/status advertisers, affiliates and clients. Perhaps Alex Edmans is revealing bias as opposed to correlation.
Ergonomics and What People Do
Ergonomics is a pretty important field and one of those things that people probably don’t know nearly enough about. I’m lucky enough to have a mother whose job requires a heavy dose of ergonomics expertise, so I’ve been aware of it for longer than most.
Anyway, one of the ongoing debates in the discipline is over what the optimal workstation configuration is for office workers (i.e. people who get paid to sit on their butts all day and stare at a computer). This article starts with something most people probably don’t know:
Sitting for more than 1 hour has been shown to induce biochemical changes in lipase activity (an enzyme involved in fat metabolism) and in glucose metabolism that leads to the deposit of fats in adipose tissue rather than these being metabolized by muscle, and extensive sitting also relates to heart disease risks, so people are advocating standing to work because this use more muscle activity (burns about 20% more calories). These changes happen in both fit people who regularly aerobically work out and also unfit and obese people, so regular exercise doesn’t address this.
And here comes a typical ergonomic follow-up:
But, standing to work has long known to be problematic, it is more tiring, it dramatically increases the risks of carotid atherosclerosis (ninefold) because of the additional load on the circulatory system, and it also increases the risks of varicose veins, so standing all day is unhealthy. The performance of many fine motor skills also is less good when people stand rather than sit.
Ambiguity.
I really like this quote, because it cuts through the prescriptive garbage and examines what people actually DO:
studies have found that the use of sit-stand stations rapidly declines so that after 1 month a majority of people are sitting all the time.
People are lazy, mostly, and for whatever reason, it is in our nature to want to sit. We’re compelled to sit. So don’t worry about fancy-pants workstations, optimize your sitting environment so you don’t hurt yourself.
And the older you are, the more important all this is, for exactly the same reason there weren’t any 60-year-olds in my soccer league last summer. Bodies break down.
The World’s Biggest Employers
The New Pitchbook Paradigm
One of my pet theories is that eventually all information is going to be distributed via the “web browser stack” of technologies. Here’s what I mean by this:
Today, people in jobs like mine spend a lot of time building sales presentations. People call these different things: “decks”, “pitchbooks”, “submissions”, etc. They’re all the same thing: a summary of deal-relevant data, narrative and visualizations available in both print and electronic form distributed by email or ftp.
The technologies used are still dominated by Microsoft Office, which is probably 90% of the reason why Microsoft is in any way relevant these days. We write using Word, we analyze using Excel and Access, we present with Powerpoint and we (ugh) code in VBA. We then ‘pdf’ (verb) the documents, which is another proprietary bit of software, and email the files out.
This setup is expensive, time consuming and will one day go to the way of the Telex and the Typing Pool. Here’s tomorrow’s paradigm:
- Write Text In HTML
- Style in CSS
- Distribute Information by Web Server
- Send Data via FTP
- Visualize With Jquery-based applications (yikes!)
The data are immutable (bye bye adobe), the odious Microsoft Word is finally slayed and email file limits are forever circumvented. Microsoft’s last stand will be with Excel, as long as it doesn’t commit upgrade suicide, which the latest version suggests is a real possibility. That program is still one of the greatest products ever developed.
One of the projects I’m taking on at work is to build parallel sales documents in HTML/CSS (Powerpoint may already be almost dead). Because I don’t want to infect my mind with the odious MS Word any more than I need to, I’ll probably build everything in HTML and write a script that translates it into Word.
Hopefully, I’ll be successful and begin to engineer a transition from the old stack to the new. We may be first movers here, folks! We’ll be so high status, clients will shower us with business.
Not Unreasonable 