Tough Being On Top: A Continuing Series…

Posted on by David Wright

By far the most difficult skill for me to learn as CEO was the ability to manage my own psychology…

Nonetheless, very few people talk about it and I have never read anything on the topic. It’s like the fight club of management: The first rule of the CEO psychological meltdown is don’t talk about the psychological meltdown…

WFIO which stands for We’re F#%ked, It’s Over (it’s pronounced whiff-ee-yo). As he describes it, every company goes through at least two and up to five of these episodes. In all cases, WFIOs feel much worse than they are—especially for the CEO…

Mediocre CEOs point to their brilliant strategic moves or their intuitive business sense or a variety of other self-congratulatory explanations. The great CEOs tend to be remarkably consistent in their answers. They all say: “I didn’t quit.”

That’s Ben Horowitz.

Silly Name, Toastmaster…

Posted on by David Wright

So I’m joining the toastmasters public speaking club. Below are some impressions following my first meeting.

I was surprised at how much unprepared speaking there was. The breakdown is about 50/50 between prepared and extemporaneous sessions. When I think of public speaking, I typically imagine “speeches”, with cue cards and expressive keeners boring the class to sleep about volcanoes or something.

Here, the main event is the random selection portion.

Topic: your favorite season. Sally? Could you come up? 2-4 minutes.

Topic: your favorite sport and why. Aaron? Kindly take your turn.

Topic: what you think of Toastmasters. Marty?

Marty, as it happens, thought he would trash Toastmasters with his little impromptu; it was something to behold.

His basic point was that people don’t show up or participate enough and he snarked about how that gave him more opportunities to practice his own craft. Not a terrible message, really, but he used lots of words like “failure” and “shame” and “wasting your time and money” in a very aggressive manner. It was, frankly, rather unpleasant. But he was the best speaker of the night.

There are a few other quirks, too. For instance, there’s an official “grammarian” who counts peoples’ ‘ums’ and ‘ahs’ and, at the end of the night, stands up and lists off each presenter’s transgressions. It’s quite a list.

Most of the participants are ESL-types, which isn’t terribly surprising, but there are more women than I was expecting.

At least, with this blog, I have a lot of material that I’ve written down that I can use for speeches. That’s no accident, by the way.

First Impressions

Posted on by David Wright

I know that first impressions matter and that you can learn some surprising things from someone just by looking at them.

What I don’t know, though, is what people think of me when they first see me.

Remember hotornot.com? It would be interesting to see such a site that rates people on some other dimensions: likability, trustworthiness, aggression, psychopathy.

And imagine tracking a group of people over time in a panel study?

I bet you’d get a good feel for social mobility over time, too.

Forget income data!

John Paulson Bets on Inflation

Posted on by David Wright

I went to a talk today by John Paulson who has a big bet out on gold.

His logic:

1. inflation is related to money supply (proof? He never mentioned Milton Friedman for some reason)

2. Gold is related to inflation

3. Money supply is increasing, therefore gold will go up

I want to look into it some more, but judging by the graphs in his fancy pamphlet here (take my word for it), there wasn’t anything like today’s spike in the money supply during the last gold run up.

And, um, there isn’t any inflation today.

So has something changed?

Again, I want to do a bit of research here but the short answer is… who knows!? Who cares!? He has a gold fund and it’s up 60% or something.

Take your fancy pants ‘analysis’ and go write some blog posts about it, Poindexter. Those boys might even read it on their way to the bank.

Characteristics you can’t change

Posted on by David Wright

I recently listened to an interview with Hal Varian, wherein he advocated a common view: the importance of statistical analysis is increasing and it isn’t likely to stop soon. Organizations and individuals should therefore concentrate on improving analytical capabilities to stay ahead of (on?) the curve.

I’m on board only with a very specific version of this view. Since routine tasks can be automated, the only part of a statistical analysis that is really ‘hard’ is the pre-analytical part: sourcing, verifying and scrubbing the data. Once you have a crisp and polished database, the conclusions often leap off the screen.

Hal has an interesting way of describing competitive advantage:

[Having a] scarce factor of production that is highly complementary to something that is ubiquitous and cheap.

It’s extracting something that we can recognize as data from the mess of everyday life that is the real skill.

Over to Europe, where the courts just destroyed a reliable dataset for auto insurers, who now can’t rate policies based on the gender of the driver.

Now, gender is an awesome data point: it’s easy to record, hard to fake and damn good at predicting outcomes.

The problem with it is, of course, that correlation and causation aren’t the same thing. Male-ness may be correlated with a bad driving record, but it isn’t causing it. Besides, within reason, once a guy, always a guy. Where’s the incentive for de-risking dudeness?

As I read it, the courts are implying that insurers should only rate on causation variables, because then you’re rewarding or punishing for actual changes in risk.

I can see logic in that.

What You Wish For…

Posted on by David Wright

One of the blogs I frequent is Scott Adams‘ who, in my opinion, writes like a decent baseball player: mostly strikeouts (boring posts) and walks (skipped without reading), some singles (posts I read) and the occasional home run. By home run, I mean what Tyler Cowen and Bryan Caplan mean about Robin Hanson:

My other friend and colleague Bryan Caplan put it best: “When the typical economist tells me about his latest research, my standard reaction is ‘Eh, maybe.’ Then I forget about it. When Robin Hanson tells me about his latest research, my standard reaction is ‘No way! Impossible!’ Then I think about it for years.”

Anyway, last week, Scott pulled one of his posts and made a big deal of it. I was traveling and couldn’t muster the interest to try and figure out what happened, so I got on with my life. Little did I realize that this was a tempest in some teacup or other, and prompted Scott to pour his heart out in a meta-post:

I write material for a specific sort of audience. And when the piece on Men’s Rights drew too much attention from outside my normal reading circle, it changed the meaning.

I found that interesting and I see a parallel to a recent theme rattling around in my little hall of mirrors: the constraints on leaders.

There’s a massive incentive for prominent folks to be all things to all people and ride the gravy train as long as they can.

You know, don’t anger the audience.

But that audience is desperate to be provoked! It feels so good to set evildoers straight, people happily blur the line between misunderstanding and deliberate offense.*

I’ve tried and failed to find a certain quote from frustrated pundit pondering the fate of Larry Summers following Obama ’08. The upshot was that this guy was puzzled why so ‘smart a guy’ wrote such crappy columns at the FT. Never read them myself, but I gather they parroted conventional wisdom nakedly pandered to declared political allies. No boats being rocked there.

Controversy is fine for small audiences but, believe it or not, our system carefully selects the leaders we have. They’re the ones saying what we (collectively) want to hear.

Huh.

 

*Far as I can tell, adult life starts in self-absorbed adolescence, then sets an infuriating pace of expanding complexity. No honest, self-aware mind can pretend to keep up. Why, then, bother being honest and self-aware?

Organizations as Leaders

Posted on by David Wright

In syndicated financial transactions, having larger, higher-status companies on a placement makes a genuine difference in completing it. Generally, a company’s status is closely linked to its longevity and (re)insurers feel this even more keenly. For organizations whose purpose is to absorb economic shocks, the highest achievement is to persist.

Incidentally, I am constantly intrigued by the anthropomorphism. Corporate law aside, companies aren’t persons. It makes as little sense to refer to a conscious entity called “Sony” or “AIG” as it does to say “China” devalues its currency or “America” wages war. Individuals make decisions, not organizations.

Anyway, I get why there are leaders and followers. In the reinsurance world*, where syndicated placements are common, the only accepted competitive advantage is a company’s record of sourcing and selecting risks to assume. Not too hard to copy that, is it. And so you have a relatively homogeneous market with terms usually set by the company longest in the tooth.

The logic here reminds me of an idea I really struggled to understand for a while. I’ll try explaining it with an example from the link.

The number of things we use our eyes for is very large. If all we ever did was look down a pipe, we could get by with lots of configurations: one eye, fifty eyes, etc. But because there are so many tasks for our eyes, there’s really only one solution that works optimally for everything: two eyes.

Systems that need to adapt to many environments tend to converge to an optimal solution. Homogeneity is a sign of progress!

There’s a competing idea that celebrates diversity. This is the theme of Scott Page’s *The Difference*, which taught me two things that I already knew, but always need reminding of: first, diverse problem solving heuristics in cooperation are superior to homogenous ones.  Second, that real solid ‘scientific’ proof of a social phenomenon is a stupendously (stupidly?) rigorous affair.

So, diversity or uniformity? I’m not sure which is right, really, and maybe both are. Diverse heuristics get you to the answer faster, no doubt, but once the optimal answer is discovered, the diversity isn’t very useful anymore. Well, until the environment changes, that is.

Some things always work. Until they don’t.

*Insurers tend to compete with different distribution models; reinsurers, for the most part, don’t.

Vindication

Posted on by David Wright

And here I genuinely thought I was mailing in that last blog post.

I just wrote it a day early!

Genuinely not caring about pressure is perhaps what gives kids the upper hand in poker play:

But really, we don’t know what making $400,000 or losing $800,000 means, because we don’t have families or whatever. This blind spot gives us the freedom to always make the right move, regardless of the amount at stake, because our judgment isn’t clouded by any possible ramifications.”

That’s from the NYT.

And here’s Tyler Cowen on professionals vs amateurs. It’s hard to excerpt his short post:

Amateurism is splendid when amateurs actually can make contributions.  A lot of the Industrial Revolution was driven by the inventions of so-called amateurs.

In fields where risk is high and barriers to entry are relatively low, amateurs will dominate.

Here’s an awesome bit on politicians:

Policymakers need more of a sheer willingness to do the right thing, even if it means sacrificing reelection [depends also on knowing what the right thing is -DW].  Selection mechanisms, however, do not much favor that bravery.  For a sane, well-adjusted person, the job is neither fun nor well-paying, so the job attracts people who love being in office and thus who fail to do the right thing.

Suitability for any given job is, at best, evaluated on messy proxies for future performance. For many jobs, selection criteria have a zero (or even negative!) correlation to expected performance.

Often it is silly to fume about poor performance without evaluating the selection process.

Maybe you’re getting exactly what you asked for?

Know What They Say About Big Wrists…

Posted on by David Wright

One of the enduring puzzles in boxing is how some guys are able to shoot up through the weight divisions and stay competitive, while others can’t “carry” the extra weight and struggle with stamina and power as they move up.

Bad Left Hook has a fascinating analysis of this very topic, focusing on Manny Pacquiao, since he’s taken titles in no fewer than eight weight division. He’s won the lineal title in four. Amazing stuff.

How does he do it? Well, Manny has huge wrists.

You see, wrist size is associated with overall skeletal mass. So someone who has large wrists probably also has a large skeleton and, all things equal, probably weighs more than average.

Manny’s 8-inch wrists dwarf the expected 6-something wrists of the ‘average’ fighter his height.

The thing that’s amazing, then, isn’t how high up he can go in weight (Manny’s calculated ‘optimal’ weight is 150lbs), but rather how low he started! He must have been emaciated at 109lbs when he started out.

In other news, I found out what happens when you overtax your calves running in your fancy new ‘shoes’: you damage your Achilles tendon. I stopped running a week ago and did a quick 4k this morning. Still have pain.

I am furious with myself. This is destroying my training schedule.