Monthly Archives: March 2010

Hard Facts: Mergers

By Robin Hanson · March 8, 2010 8:00 pm · Comments (6)

Back in December Nancy Lebovitz commented here that the book Hard Facts, Dangerous Half-Truths And Total Nonsense: Profiting From Evidence-Based Management “may be may be of interest to any contrarian”  She is quite right.  So much so that I will do a series of posts quoting from it. Here is Hard Facts on mergers:

Study after study shows that most mergers – some estimates are 70 percent or more – fail to deliver their intended benefits and destroy economic value in the process.  A recent analysis of 93 studies covering more than 200,000 mergers published in peer-reviewed journals showed that, on average, the negative effects of a merger on shareholder value become evident less than a month after a merger is announced and persist thereafter. …

More thoughtful leaders might do what Cisco Systems has done – figure out the factors associated with successful and unsuccessful mergers and then actually use those insights to guide behavior.  … A Fortune article on bad mergers noted that “infrastructure giant Cisco has digested 57 companies without heartburn.” … Cisco figured out that mergers between similar sized companies rarely work, as there are frequently struggles about which team will control the combined entity.  … Cisco’s leaders also determined that mergers work best when companies are geographically proximate, making integration and collaboration much easier. … and they also uncovered the importance of organizational cultural compatibility for merger success.  …

You might think that companies would learn from all this experience … you would be wrong.  Business decisions … are frequently based on hope or fear, what others seem to be doing, what senior leaders have done and believe has worked in the past, and their dearly held ideologies – in short on lots of things other than the facts. (pp. 4,5)

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Motivated Legal Bias

By Robin Hanson · March 7, 2010 5:00 pm · Comments (22)

The probability of being sentenced to death is much greater if a defendant kills a white or Hispanic victim who is married with a clean criminal record and a college degree, as opposed to a black or Asian victim who is single with a prior criminal record and no college degree. …

“Irrelevant social facts also shape the ultimate state sanction” Phillips says. “In the capital of capital punishment, death is more apt to be sought and imposed on behalf of high status victims. Some victims matter more than others.”

Phillips research is based on 504 death penalty cases that occurred in Harris County, Texas between 1992 and 1999.  Drawing on the same data, Phillips’s previous research demonstrated that black defendants were more likely to be sentenced to death than white defendants in Houston. The racial disparities revealed in the prior paper become even more acute after accounting for victim social status – black defendants were more apt to be sentenced to death despite being less apt to kill high status victims.

More here (HT naz). I expect such patterns to be found in most legal jurisdictions, not just Harris County Texas.  You will find it hard to find any lawyer, judge, or law professor who will go on the record saying these are officially accepted as legitimate considerations in legal sentencing.  Most will say the law “tries” to ignore such considerations.  And yet such patterns have long existed, have long been widely known to exist.

These are motivated biases, not just random accidents of a system trying to be fair but failing to because of limited human mental capacity.  These errors are far more likely to persist than the opposite error.  If the opposite errors were suddenly to become common, enormous concern would be expressed, great resources would be spent, and we’d be willing to consider large institutional changes to eliminate them.

The place such errors enter is of course via “judgment.”  We recoil in horror at the thought of a simple legal system where judges or juries could make any decision they wanted in each case they considered.  But we also recoil at the thought of a legal system with explicit rules which had to be followed exactly in each case.  We instead prefer a legal system with lots of specific rules, where in the end “reasonable” people are allowed to exercise “judgment” about how to “interpret” the rules.   It sure looks like what we want is the appearance of constraining ourselves to follow rules, combined with the practice of arbitrary choice.

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Managing Our Cut

By Robin Hanson · March 6, 2010 8:40 pm · Comments (41)

Our income tax system gives each of us a stake in the work of others – the more money others make, the more we each get via taxes.  In principle we could use this fact to justify a great deal of intervention in everyone’s work lives.  For example, one might argue: why should we let folks choose fulfilling but poorly paid jobs like social worker, veterinarian, or forestry agent, if they are capable of becoming an lawyer, doctor, or engineer?  Or why should we let folks work part time to focus on a music or acting hobby, or choose to live anywhere but the city where their skills are worth the most?

To most folks such regulations seem intolerably intrusive.  But when people are asked to justify our common and extensive regulations and subsidies of medicine and education, they often mention exactly this issue – that such interventions make sense because we all have a stake in the work of others via the income taxes those folks pay.  Why the asymmetry?  Why do folks think these arguments make sense regarding medicine and education, but not regarding choice of career or location?

My guess: humans inherited intuitions that the community should have more say in and contribute more to medicine and education.  This is the way our distant ancestors did things in their small nomadic forager bands, and we intuit we should act similarly today.  The stuff about managing our cut of others’ income is just a rationalization.

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Realistic War Films?

By Robin Hanson · March 6, 2010 7:40 am · Comments (23)

A few months ago I had a nice long talk with a smart high-ranking, well-published (ex-) military officer who focuses on soldier psychological issues.  He said most war movies aren’t at all realistic.  When I pressed him for a realistic film, he offered Catch-22, at least for emotional realism.  This doesn’t appear on any of the four lists of most realistic war films I found in a quick search (here, here, here, here), which agree only modestly with each other.

The supposedly realistic Hurt Locker is favored to win Best Picture tomorrow, but some complain about its realism:

Many in the military say “Hurt Locker” is plagued by unforgivable inaccuracies that make the most critically acclaimed Iraq war film to date more a Hollywood fantasy than the searingly realistic rendition that civilians take it for. … To those who were there, Iraq is real life. And they’re very sensitive — some would say overly so — when their war is portrayed via a central character who is a reckless rogue. … “When he puts a hood on like Eminem and starts roving outside the wire, it’s ridiculous.”

Is it even possible to make and sell a realistic war movie?  The experience of war varies enormously across wars, battles, roles, moments, etc., and most of that is insufferably slow and boring.  Since war is so powerfully symbolic, and so many care about those symbols, it seems many would complain about most any emotionally compelling war film, even if exactly accurate on a particular event.

What exactly could it mean for a film to be “realistic”?  Since few are entertained by watching random samples of real life, entertaining films must select strongly from the space of actual and possible events.  One might allow a movie any initial setting, no matter how strange, and call it realistic if events depicted that were typical conditional on that setting.  But then how long does the movie get to “set the scene,” after which we start to evaluate its realism?  And for how many settings could realistic behavior given that setting be entertaining?

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Prefer Ignorant Fans

By Robin Hanson · March 4, 2010 8:40 pm · Comments (25)

Tell pretty women they are smart, and smart women they are pretty. saying

We prefer to be liked, vs. disliked, but we also care about which features others most like about us.  For example, we might prefer to be liked for our sense of humor, rather than our looks.  But it seems to me that we most prefer that people who like us not know why exactly they like us.

It is of course a bad sign about someone’s opinion of you if they can’t think of any positive features of you.  It is also a good sign about their devotion if they sometimes try to make sure you know that you have good features.  But we would be disappointed and even disturbed to learn that someone knew that how much they liked us was captured by a particular known formula referring to objectively measurable features, no matter what those features were.

Someone who knew exactly where you and other folks ranked on their quality scale, and who could easily track how those rankings changed with time will know how much they like you more or less as your features changed.  Even if you are their favorite person at this moment, the odds are that someone else will soon outrank you.

In contrast, consider someone who has had a lot of contact with you, and who knows mainly that they like you, but not why exactly they like you.  This person will have more trouble finding someone else that they like more than you.  In this case you are more of an experience good, that has to be experienced to be evaluated.  If it is expensive to experience other folks enough to know their attractiveness, you have more confidence that you will continue to be one of their favorite people.

(From a conversation with Amanda Budny.)

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Econ of Nano, AI

By Robin Hanson · March 3, 2010 10:35 pm · Comments (10)

My January talk at Foresight 2010, Economics of Nanotech and AI, is now available: video, slides.  Seems I had a habit of messing my hair while talking.  Silly me.

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Near Is Selfish

By Robin Hanson · March 3, 2010 1:30 pm · Comments (14)

If the ship is sinking, do you save yourself or risk your life to save others? The answer, it seems, depends on how long the sinking takes. If there’s enough time, you can switch from adrenalin-driven self-preservation to conscience-driven self-sacrifice.

The insights come from a new comparison of survival data from the sinking of the Titanic in 1912 with the loss of 1517 lives out of 2207, and the fateful torpedoing of the Lusitania three years later, which killed 1198 passengers out of 1949.

The main difference between the two sinkings was time: it took 2 hours and 40 minutes for the Titanic to go down, while the Lusitania sank in just 18 minutes. The result: a huge difference in survivor profiles.

On the Lusitania, survival favoured able-bodied men aged between 16 and 35, … On the Titanic, in contrast, the same group of men were … more likely to die. … Children were 30.9 per cent more likely to survive on the Titanic, compared with passengers over 35, while on the Lusitania children had no better survival chance. …

Strikingly, women of all ages on the Titanic had a probability of survival 53 per cent higher than for men, compared with an 11 per cent higher chance of dying on the Lusitania. … First-class passengers on the Titanic had huge survival advantages non-existent on the Lusitania.

More here.   Yet more support for the thesis that far mode is more for social image, near mode more for personal gain.

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The Biggest Lie?

By Robin Hanson · March 2, 2010 10:45 pm · Comments (21)

The message of the movie The Invention of Lying, according to the NYT:

A world without lying is also one without art. … Lying becomes a means to transcendence, an escape from the quotidian, from our oppressive literal-mindedness, from our brute selves. … The truth doesn’t just hurt — sometimes it’s also degrading, and not just for the characters. The movie encourages our inner bully, coaxing it out for giggles.

Notice: a movie dedicated to the idea that lies are better than truth induced little outrage or opposition!  Reviewers’ main complaint was just that it didn’t stay funny long enough.  Can anyone make a similarly compelling movie dedicated to the opposite claim, that truth is better than lies?  If not, doesn’t that count as evidence that most people do in fact accept that lies are better?

The movie is set in an alternate Earth where people not only never lie, they go out of their way to tell truths others want to know, even when that makes the speaker look bad.  This is far from a stable social equilibrium – most any weak tendency to more often repeat successful behavior would quickly lead away from this.  But let’s set that issue aside to consider the movie’s message.

In this world people are selfish, shallow, cynical, base, and rude. They explicitly think in terms of evolutionary motives; men want sex with pretty women, while women want money and hansome good-gene sex partners, etc.  People act on these beliefs, which makes them dull, unhappy, and emotionally flat:

The undressed, undeceptive, utterly honest world is no Eden: flat lighting, earth tones, beige bachelor flops, blank-walled offices, bland daytime barrooms.

A man notices that he can gain by lying, first to avoid being evicted.  Then he tries to lie to bed a pretty woman, but finds he just doesn’t want this.  Apparently lying induces altruism, as he spends his time telling lies to make various random strangers like themselves better and be more entertained.  He also lies to get cash and fame, but that is apparently all right in pursuit of a woman – the main thing he likes about her is that she is “out of his league” pretty.  But he refuses to lie to her about why she should like him.

He invents God and heaven, lies big and bright enough to make the whole world honestly happy.  A headline reads: “Finally a reason to be good.”  The man finally convinces the woman to focus less on his looks; “he’s smart funny kind loving, makes me feel special, makes me happy.”  She learns to lie to please, and see the best in people.

So the movie’s thesis is that to be happy, we must self-deceive and embrace incorrect but inspiring far-view ideals, such love, friendship, altruism, laughter, art, and fiction.  This thesis affirms a core ideal we seem desperate to believe: that common far ideals have little practical function.  For example, we want to think that our loves of fiction or laughter are “true” loves, and do little to achieve base and personal purposes.

In fact of course our far ideals evolved to serve concrete, practical, and largely personal functions.  A world without lies would still contain art, laughter, fiction, etc. – we’d just be more honest about the functions they serve.  But that is a truth we dare not tell; we’d actually rather believe that most of our other cherished ideals are lies.

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No Offense Offends

By Robin Hanson · March 2, 2010 10:00 am · Comments (24)

no offense – A phrase used to make insults seem socially acceptable.

On Facebook, Greg Benford said:

When I ignore requests for drinks, cupcakes, palm trees, etc. to take part Mafia Wars it’s not a statement about the folks who are enjoying such pursuits. If I accepted this invitation to play in a space fleet game (how cool is that?) I would never get anything done. It’s so easy to get distracted as a writer which is why I’m declining all these lovely invitations. Now back to work.

I responded:

You are making a good choice, but you can’t avoid the fact that your choice is also a statement about the choices that others make.

Greg often faces a choice between playing and getting work done, and he seems to usually respect more the choice to get work done.  When he sees other folks choose instead to play, surely he must infer a substantial chance that they faced a similar choice but made the choice he respects less.  Even if he doesn’t think this way, and even if he explicitly says this, the rest of us must assign a substantial chance that he does in fact think this way.  Yes we can’t be sure, but even so, on average disagreement is disrespect.

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Hiding Handouts

By Robin Hanson · March 1, 2010 3:30 pm · Comments (26)

Richard Thaler in the NYT:

Here’s a list of national domestic priorities, in no particular order:  Stimulate the economy, improve health care, offer fast Internet connections to all of our schools, foster development of advanced technology. Oh, and let’s not forget, we’d better do something about the budget deficit. … There [is] a way to deal effectively with all of those things at once, without hurting anyone. …

The usable radio spectrum is limited and used inefficiently. … The target that looks most promising in this regard is the spectrum used for over-the-air television broadcasts. … People in the industry refer to them as “beachfront property” … Over-the-air broadcasts are becoming a nearly obsolete technology. Already, 91 percent of American households get their television via cable or satellite. So we are using all of this beachfront property to serve a small and shrinking segment of the population. …  Professor Hazlett estimates that selling off this spectrum could raise at least $100 billion for the government and, more important, create roughly $1 trillion worth of value to users of the resulting services. …

Who would oppose this plan? Local broadcasters are likely to contend that they are providing a vital community service in return for free use of the spectrum. … [But] about 99 percent of these households have cable running near their homes, and virtually all the others, in rural areas, could be reached by satellite services. The F.C.C. could require cable and satellite providers to offer a low-cost service that carries only local channels, and to give vouchers for connecting to that service to any households that haven’t subscribed to cable or satellite for, say, two years.  Professor Hazlett estimates that $300 per household should do it: that amounts to $3 billion at most.

Yes, Hazlett’s solution would require poor rural couch potatoes to suffer the indignity of accepting more obvious handouts – today’s “free” tv better hides those handouts.  And yes we often pay substantial costs to show our allegiance to certain precious symbols.  But we pass up a trillion dollars of gains to avoid even the hint of dissing poor rural couch potatoes?

We forgo similar benefits when we let poor folk drive old very polluting cars, and then require expensive emissions reductions elsewhere, such as in power plants.  It would be far cheaper to ban old cars, and pay the poor more to compensate, but this also makes our handouts more obvious.

Couch potatoes and polluters are not exactly highly respected in our society.  So why is it that when such folks are also poor, we will throw away trillions in gains to avoid dissing them via direct handouts?

HT Alex.

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