Tag Archives: Management

Votes Are Nearer Than Vote Talk

Bob Sutton on an ’09 near-far paper:

A traveler preparing to leave for a vacation to Cancun the following morning is more likely to process information about speedy check-in for international flights – a low-level, concrete piece of information that is related to the feasibility of the vacation, as opposed to information about the quality of sunsets on the East Coast of Mexico – a high-level, abstract piece of information that is related to the desirability of the vacation. …

They used this kind of logic to design a series of laboratory experiments where subjects were exposed to vague versus concrete messages from hypothetical U.S. Senate candidates and asked them to evaluate how positively or negatively they viewed the candidate. The key manipulation was whether the election was far off (six months away) or looming soon (one week). As predicted, abstract messages were more persuasive (and promoted more liking) when the election was six months away and concrete message were more persuasive when it was one week away.

This study has some fun implications for the upcoming elections. Let’s watch Obama and Romney to see if they keep things vague and abstract until the final weeks of the campaign, but then turn specific in the final weeks. But I think it also has some interesting implications for how leaders can persuade people in their organizations to join organizational change efforts. The implication is that when the change is far off, it is not a good idea to talk about he nuts and bolts very much — a focus on abstract “why” questions is in order. But as the change looms, specific details that help people predict and control what happens to them are crucial to keeping attitudes toward the change and leaders positive. (more; HT Hendrick lee)

Another implication: even those most political rhetorical is about abstract far principles, actual votes tend more to be based on concrete near considerations. This is a reason democracies aren’t as bad as you’d think looking at typical voter opinions and election rhetoric. The paper also says:

[This] effect was observed primarily among inexpert respondents, who are more likely to correspond to swing voters.

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Em Need For Speed

I recently found fault with Keith Henson’s assumption that sexual competition would induce ems to run as fast as physically possible. So how fast do I think ems would run? Here is my current analysis:

Em speeds should intersect supply and demand. Speed supply comes from how em hardware (e.g., device, energy, and cooling) costs vary with speed. Since human brains use a very parallel design with cells whose signals change far slower than electronic circuits, the cost of em hardware should be roughly linear in em speed across a wide range, to a very fast max, perhaps a million times faster than humans. In this range, thinking twice as fast costs about twice as much.

Above that linear regime, a 1% speedup will add more than 1% to costs, with this speed premium approaching infinity at a maximum feasible speedup, perhaps a factor of a billion. Very slow ems should also suffer a cost premium, as they’d still need to store a mental state.

With compatible hardware, brief speed increases might be cheap if em brains have substantial heat capacity. Longer but still temporary speed changes might be made by swapping into different brain hardware, though this could have substantial switching costs.

On the demand for em speed, I see seven relevant factors:

  1. When physical systems have natural resonance periods, managing those systems suggets em response times near the shortest of those periods. For example, since small moveable human body parts have resonance periods of a fraction of a second, human brains have reaction times on that time scale – reacting faster might help sometimes, but costs too much. Ems with smaller human-like bodies would want faster brains to match their shorter periods.
  2. Ems that talk often would benefit from having similar mind speeds. This would create a tendency for em speeds to clump at common standard speeds. Ems that talk often to humans would have near human speeds. Ems with highly mismatched speeds could talk naturally if the slow one temporarily moved to faster mental hardware.
  3. It is awkward for ems to talk when there are substantial communication delays. For any given distance to em conversation partners, there is some max speed above which delays are noticeable and hence costly.
  4. It is tempting to use faster ems to speed up any project whose duration might take a substantial fraction of the economy’s doubling time, or where there is a race with competing projects. Of course project durations may be limited by factors other than em thinking speeds.
  5. The more important is a negotiation or argument between ems, the more private gains can come from having a faster em mind, to out-think the other ems. So in hierarchical organizations, higher level leaders would have faster minds.
  6. When it is useful to coordinate two different tasks, one could either have two ems do the two tasks and talk periodically, or have a single faster em do both tasks. A single em doing both tasks probably has skills less well matched to those tasks, and would pay extra costs to switch between tasks. But when task coordination is important enough, these can be prices worth paying.
  7. When it is important to minimize the time a worker is away from their tasks at leisure and sleep, it will be tempting to run those non-work activities very fast. This could allow near continuous time coverage of a task.

Thus while some ems will have speeds to match the physical systems they manage, and ems would be faster at sleep, leisure, on thinking-dominated projects, and at high organization levels. The speed of other ems would be set more by how important is coordination for their tasks, and em speeds would tend to clump.

Coordination seems especially important in key design tasks, and in management. For example, it would be especially tempting to have all the parts of a large intricate software project written by the same very fast em. It would also be tempting to have the top thousand or more manager roles in a big organizations all be filled by a single very fast em.

Faster ems would naturally tend to be richer ems, if nothing else because they’d have some discretion in how they used their time, and that time is worth more. Thus a single very fast boss could afford to own more of a firm, reducing owner vs. manager conflicts.

If faster ems tend to be richer, win arguments, and fill key design and management roles, they would naturally be treated as higher status, at least by our status cues. Ems would also likely see them as higher status.

Social roles can often be usefully divided into roles that deal more with insiders, vs. roles that deal more with outsiders. For example, in a family, childcare is an inside role, while working for money is an outside role. In a hierarchical organization, managers have a more outside role – they deal more with outsiders. We care more about openness and helpfulness in inside roles, but more about opacity and toughness in outside roles.

When ems of different speeds meet, the slower em would naturally be more transparent and the faster one more opaque. It seems that faster ems would tend more to take on outside roles, which will be associated with higher status. In hierarchical organizations, subordinates might be expected to be open, such as via allowing direct hardware access to their emotional expressions, while bosses might typically hide their feelings from subordinates.

The overall picture here seems to be of even more inequality than I had imagined when I just considered wealth inequality among a larger future population whose lifespans vary more. Each em firm may have one very fast rich dominant boss who personally owns a lot of the firm. All front line managers might report to this one super boss, in meetings where they temporarily run at boss speeds, and are expected to be emotionally open to boss inspection. Sir, yes sir!

All else equal, an increase in the spatial extent of a firm or city would tend to reduce the speed of ems that might notice substantial communication delays. If em firms and cities tend to naturally grow larger over time, they’d also tend to naturally become slower, at least at their peak speeds. The gains that the would have otherwise achieved from faster speeds would be compensated by being able to interact naturally with a wider range of ems.

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An Info King

I was recently told about a manager of a ~500 person bank division decades ago. Seems this manager created an interesting info equilibrium. In his equilibrium, this manager could call anyone in the division at any time and get frank answers about their work. The manager would not tell anyone about the call, and he would viciously punish both anyone who ever lied to him in such a call, and anyone who punished anyone for giving frank call answers. So when you went to present something to this manager, you knew he might have called any of your subordinates for frank answers about your presentation.

It probably wouldn’t work to have an equilibrium where there are many people with this power to call anyone and get a frank answer. And it wouldn’t work if the organization was so big that the manager knew little about each person he might call. But at least within certain scale limitations, this is a way to cut through information barriers to get frank assessments on key issues into the hands of a pivotal decision-maker.

So would it work to nest this structure two levels deep? That is, could 200,000 people be organized into 400 divisions each like this, where the head of the whole thing could always call any division head and get frank answers?

Added 3Apr: My anonymous source elaborates:

People gave frank answers because they were seeking credit approval to credit submissions.

The submissions were the outcome of protracted and detailed documented process of sequential deliberation. They were also subject to annual audit and also specialist lending inspection.Verification was embedded into the process.

These were complex high value transactions that justified a significant investment of time.

The info king was the officer with the boards’ delegated discretion. The transactions were complex and/or high value and required elements of judgement.

The info king knew that the issue, given the high stakes for the transaction sponsors, was not fraud (because the verification processes protected against this), the issue was bias and nuance, and that required a subtler verification process.

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Manzi On Trials, Consulting

Arnold Kling on Jim Manzi’s new book Uncontrolled:

Manzi is a fan of randomized controlled experiments in business and public policy (in the latter, examples include the Rand health care study and the Wisconsin income-maintenance studies). I believe that decision-makers will resist this approach, for the same reason that they resist Robin Hanson’s suggestion to use prediction markets. That is, decisions are not necessarily about achieving results. They are often about establishing the status of the decision-maker. For a decision-maker to conduct experiments or to employ prediction markets is to admit ignorance and doubt, which lowers the decision-maker’s status.

Manzi responds:

I agree that this is true, and is a big deal. In the book, I expend a fair amount of effort describing the procedures and methods that have been used to ameliorate this problem (though never eliminate it) in therapeutic medicine, many large businesses, and certain narrow areas of government policy development. I think at a more strategic level, however, this problem is best addressed by decentralizing authority and accountability. Staff businesspeople, academics, and so on have much larger incentives to use “analysis as rhetoric” in the manner that Kling refers to than do people who are responsible for achieving outcomes in a marketplace. If I am paid (or live or die) based on my programs working or not, I am much more likely to care about what really works rather than getting tangled up in what analysis will get me noticed and promoted.

The book isn’t out yet. Kling got an advanced copy, but I did not. I look forward to seeing Manzi’s detailed discussion, but the above response seems to miss the point – authority and accountability won’t be decentralized if that lowers the status of central folks. Just because they should decentralize doesn’t mean they will.

Similarly, a few weeks ago Manzi responded to my post on the puzzles of why firms pay so much for often trite consulting advice, and why such advisors hire so many fresh grads of top schools. I suggested that firms are more buying prestige to bully locals into cooperation than they are buying info per se, and that recent top school grads offer the most prestige per wage dollar. Manzi disagreed: Continue reading "Manzi On Trials, Consulting" »

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Seeking Firm Info Hypocrisy Examples

Arnold Kling:

[James] Manzi is a fan of randomized controlled experiments in business and public policy (in the latter, examples include the Rand health care study and the Wisconsin income-maintenance studies). I believe that decision-makers will resist this approach, for the same reason that they resist Robin Hanson’s suggestion to use prediction markets. That is, decisions are not necessarily about achieving results. They are often about establishing the status of the decision-maker. For a decision-maker to conduct experiments or to employ prediction markets is to admit ignorance and doubt, which lowers the decision-maker’s status. (more)

The examples of disinterest in random trials and prediction markets both help convince me that management is often less interested in information that it pretends to be. But since I’m giving a talk on the subject soon, I’d like other examples. So I ask you, dear readers: what common patterns of manager behavior suggests they are less (or more) interested in info than they let on?

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Econ Advice Confirmed

We … construct management data on over 10,000 organizations across twenty countries, … [and] use a new double-blind survey tool. … We define “best” management practices as those that continuously collect and analyze performance information, that set challenging and interlinked short-and long-run targets, and that reward high performers and retrain/fire low performers. … Our management scoring grid … was developed by McKinsey as a first-contact guide to firms’ management quality. … We also test (and confirm) that these practices are indeed strongly linked to higher productivity, profitability, and growth. (more)

Not a bad quick measure of the quality of management practices. They find:

In manufacturing American, Japanese, and German firms are the best managed. Firms in developing countries, such as Brazil, China and India tend to be poorly managed. American retail firms and hospitals are also well managed by international standards, although American schools are worse managed than those in several other developed countries. We also find substantial variation in management practices across organizations in every country and every sector, mirroring the heterogeneity in the spread of performance in these sectors. One factor linked to this variation is ownership. Government, family, and founder owned firms are usually poorly managed, while multinational, dispersed shareholder and private-equity owned firms are typically well managed. Stronger product market competition … [is] associated with better management practices. Less regulated labor markets are associated with improvements in incentive management practices such as performance based promotion. …

Publicly (i.e., government) owned organizations have worse management practices across all sectors we studied. … Multinationals appear able to adopt good management practices in almost every country in which they operate. … The level of education of both managers and nonmanagers is strongly linked to better management practices.

So, the world would get more productivity and growth if it had fewer government-owned organizations, less labor regulation, stronger product market competition, and more things run by multinational firms. Gee, sounds a lot like standard economists’ advice.

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Too Much Consulting?

Last night I discussed the popularity of law, finance, and management consulting with Tyler and many somewhat-libertarian-leaning others. I was surprised that most were skeptical that firms get their money’s worth from consulting, more skeptical than for law or finance. I was also surprised that most focused on explaining why kids from elite schools work at such firms, rather than on why firms pay so much for this consulting.

To me, it is easy to understand why consulting firms attract so many elite students, given the wages, prestige, and job experience they offer. And it is also easy to see why firms might pay a ton for consulting, relative to law and finance – changing your basic business strategy can conceivably add enormous value, while minor changes to contract details and financing terms have limited value.

The puzzle is why firms pay huge sums to big name consulting firms, when their advice comes from kids fresh out of college, who spend only a few months studying an industry they previous knew nothing about. How could such quick-made advice from ignorant recent grads be worth millions? Why don’t firms just ask their own internal recent college grads?

Some say that consulting firms use their access to collect data on best practices, data that other firms are eager to pay for. But while this probably contributes, I find it hard to see as the main effect.

My guess is that most intellectuals underestimate just how dysfunctional most firms are. Firms often have big obvious misallocations of resources, where lots of folks in the firm know about the problems and workable solutions. The main issue is that many highest status folks in the firm resist such changes, as they correctly see that their status will be lowered if they embrace such solutions.

The CEO often understands what needs to be done, but does not have the resources to fight this blocking coalition. But if a prestigious outside consulting firm weighs in, that can turn the status tide. Coalitions can often successfully block a CEO initiative, and yet not resist the further support of a prestigious outside consultant.

To serve this function, management consulting firms need to have the strongest prestige money can buy. They also need to be able to quickly walk around a firm, hear the different arguments, and judge where the weight of reason lies. And they need to be relatively immune to accusations of bias – that their advice follows from interests, affiliations, or commitments.

All three of these functions seem to be achieved at a low cost by hiring good-looking kids from our most prestigious schools. These are the cheapest folks you can buy with our most prestigious affiliations, they are smart enough to judge where reason lies, and they have few prior affiliations to taint them with bias. They can not only “borrow your watch to tell you the time,” but can also cow you into submission in accepting that time.

Yes the information contained in consulting advice can be obtained elsewhere at a lower cost. Firms could hire most any smart independent folks, or set up a prediction market. But alas those sources don’t have the raw strength of status to cow opponents into submission, opponents who in practice can block changes no matter what a CEO declares.

So mine is a signaling and status story (surprise surprise). The weight of status often decides outcomes, no matter what the CEOs commands, and so CEOs often need to bring out status ringers, to cow opponents into submission.

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Leading Isn’t About Info

The study recruited 150 participants and divided them into groups of three. One person was randomly assigned to be the group’s leader; all were told they could contribute advice, but that the leader was responsible for making the decision. Then they undertook a group task: choosing a job candidate. Of 45 items of information about the candidate, some were given to all three, and some to only one of the participants. … Group members rated the most narcissistic leaders as most effective. But … the groups led by the greatest egotists chose the worse candidate for the job. … “The narcissistic leaders … inhibited the communication because of self-centeredness and authoritarianism.” … Good leaders facilitate communication by asking questions and summarizing the conversation—something narcissists are too self-involved to do. (more; HT Karl Mattingly)

I predict that as the above result becomes more widely known, we will not much change our tendency to choose egotists as leaders. Yes the ability to get subordinates to reveal unusual info is valuable to the organization as a whole, but today this ranks pretty low among the many competing considerations in choosing a leader, and that probably won’t change much in the foreseeable future.

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Respect Forecast Accuracy

The topic at Cato Unbound this month is “What’s Wrong with Expert Predictions.” Dan Gardner and Philip Tetlock’s lead essay points out a puzzling lack of interest in forecast accuracy:

Corporations and governments spend staggering amounts of money on forecasting, and one might think they would be keenly interested in determining the worth of their purchases and ensuring they are the very best available. But most aren’t. They spend little or nothing analyzing the accuracy of forecasts and not much more on research to develop and compare forecasting methods. Some even persist in using forecasts that are manifestly unreliable. … This widespread lack of curiosity … is a phenomenon worthy of investigation.

My response essay considers this puzzle. The editor summarizes:

Robin Hanson argues that most people aren’t interested in the accuracy of predictions because predictions often aren’t about knowing the future. They are about affiliating with an ideology or signaling one’s authority. … He suggests that one way to make predictions more accurate might be to lift both the social stigma and legal prohibitions against gambling.

Key quotes:

Even if disinterest in forecast accuracy is explained by forecasting being only a minor role for pundits, academics, and managers, might we still hope for reforms to encourage more accuracy? …

Hope … mainly comes from the fact that we pretend to care more about forecast accuracy than we actually seem to care. We don’t need new forecasting methods so much as a new social equilibrium, one that makes forecast hypocrisy more visible to a wider audience, and so shames people into avoiding such hypocrisy. …

It isn’t enough to devise ways to record forecast accuracy—we also need a new matching social respect for such records. Might governments encourage a switch to more respect for forecast accuracy? Yes: by not explicitly discouraging it!

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Raid The Rich

Me in March on Why Track Trends?:

Tyler’s thesis is that the US has slower growth than decades ago because we’ve used up the low hanging fruits. … My grad school (Caltech) didn’t teach macro … so I’ll stay agnostic for now. But what I can speak to is how little such trend analysis or projection matters, at least for most economic policy.  … The question of which institutions will most increase economic welfare rarely depends much on the exact values of the sorts of parameters social scientists and the media track with such enthusiasm and concern.

Me 1.4 years ago on Enable Raiders!:

A robust, properly functioning market for corporate control is vital to the performance of a free-enterprise economy. …

It is hard to exaggerate how very important this is – we’d be so much richer now if it it had long been easier for raiders to take over public firms. We now put many inexcusable obstacles (listed below) before such raiders, including disclosure, super-majority, poison pill, and merging delay rules.

Today’s Post:

Growing income disparity in the United States … has reached levels not seen since the Great Depression. In 2008, … the [140,000 member] top 0.1 percent of earners make about $1.7 million or more, including capital gains. Of those, 41 percent were executives, managers and supervisors at non-financial companies, … with nearly half of them deriving most of their income from their ownership in privately-held firms. An additional 18 percent were managers at financial firms or financial professionals at any sort of firm. …

In 1975 … the top 0.1 percent of earners garnered about 2.5 percent of the nation’s income, including capital gains. …. By 2008, that share had quadrupled and stood at 10.4 percent. … The share of the income commanded by the top 0.01 percent rose from 0.85 percent to 5.03 percent over that period. For the 15,000 families in that group, average income now stands at $27 million.

The inquiring mind is surely curious to know who exactly are today’s super-rich, and how much richer they are now than before. But good policy is mostly about good institutions, which just shouldn’t depend much on such parameters. If you worry that managers get paid more than they contribute to firm value, a robust solution is to strengthen competition for corporate control, so raiders can takeover and then fire overpaid managers. Trying to independently determine manager contribution is far far harder.

If you worry instead about how much managers respond to taxes by reducing their efforts or moving to other jurisdictions, that also probably doesn’t depend much on just how rich they are or how much that has changed in recent decades. Wanting to tax managers more because you learned that they made more money than you thought seems much more like envy than neutral efficiency analysis.

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