Tim Harford's Blog, page 61

Cautionary Tales Ep 6 – How Britain Invented, Then Ignored, Blitzkrieg

Blitzkrieg means “lightning war”, but despite the German name it was not a German invention. Back in 1917 a brilliant English officer developed a revolutionary way to use the latest development in military technology – the tank. The British army squandered the idea but two decades later later Hitler’s tanks thundered across Europe, achieving the kind of rapid victories that had been predicted back in 1917.

This is a common story: Sony invented the digital Walkman, Xerox the personal computer, and Kodak the digital camera. In each case they failed to capitalise on the idea. Why?

Featuring: Toby Stephens, Ed Gaughan and Rufus Wright.

Producers: Ryan Dilley and Marilyn Rust. Sound design/mix/musical composition: Pascal Wyse. Fact checking: Joseph Fridman. Editor: Julia Barton. Recording: Wardour Studios, London. GSI Studios, New York. PR: Christine Ragasa.

Thanks to the team at Pushkin Industries, Heather Fain, Mia Lobel, Carly Migliori, Jacob Weisberg, and of course, the mighty Malcolm Gladwell.

[Apple] [Spotify] [Stitcher]

 

Further reading

Mark Urban’s book The Generals has an excellent chapter on J.F.C. Fuller. Other sources on Fuller include Brian Holden Reid’s J.F.C. Fuller: Military Thinker and Harold Winton’s To Change An Army. 

Other sources on the development of the tank include Macksey and Batchelor’s Tank, Norman Dixon’s classic On The Psychology of Military Incompetence and Basil Liddell Hart’s The Tanks.

On modern corporate innovation try Gillian Tett’s excellent The Silo Effect, “Creation Myth” by Malcolm Gladwell, Clay Christensen’s Innovator’s Dilemma and The Disruption Dilemma by Joshua Gans.

 

The original paper on architectural innovation is:

Henderson, Rebecca M., and Kim B. Clark. “Architectural Innovation: The Reconfiguration of Existing Product Technologies and The Failure of Established Firms.” Administrative Science Quarterly 35, no. 1 (March 1990): 9–30

 

 

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A guide to having an actually happy Christmas

Is Christmas a time of magic, generosity and conviviality? Or of overconsumption, stress, and social anxiety? It is easy to make a case either way: listen to Paul McCartney’s “Wonderful Christmas Time”, followed immediately by Tom McRae’s slow sighing cover of the song and hear the same lyrics convey backslapping cheer and solitary despair.

Messrs McCartney and McRae illustrate the dilemma, but they do not resolve it. For that, we need data, so I consulted some academics on the slippery subject of “subjective wellbeing”, or as you or I would call it, “happiness”.

Two years ago, wellbeing researchers at the London School of Economics surveyed a panel of experts, asking them: “Do you think that populations on average have higher wellbeing during major festive periods like Christmas?” None of the respondents was particularly confident, but the verdict was that Christmas is a time for good cheer: 54 per cent thought that Christmas increased average wellbeing, with 18 per cent disagreeing and the rest sitting on the fence.

Fence-sitting is perhaps the wise choice here: the topic has been rather sparsely researched, and what studies do exist provide viewpoints as contradictory as Messrs McCartney and McRae. One recent piece of research by Michael Mutz found that “the Christmas period is related to a decrease in life satisfaction and emotional wellbeing”. An older study by Tim Kasser and Kennon Sheldon found instead that “subjects are on the whole reasonably satisfied with their holiday experience” and that while many people found Christmas a bit stressful, the majority did not. One thing we can say with confidence is that, contrary to the popular myth, suicide rates don’t spike at Christmas; they fall.

It may be more fruitful to ask about how different people experience Christmas — and whether we can suggest ways to enhance the joy and reduce the anxiety. One plausible hypothesis is that Christmas is an amplifier of existing inequalities. Those who are relaxed, have no money worries and a good relationship with friends and family should find plenty to enjoy in Christmas; those who are anxious, isolated or financially stretched may find Christmas makes everything worse.

An alternative view is that how we feel about the festival depends on how we approach it. Mr Mutz found that Christians felt happier at Christmas, while others felt less happy. Similarly Messrs Kasser and Sheldon found that people who spent more time with their families or engaging in religious practices tended to have a better time of things. Consumerism fared less well, according to Messrs Kasser and Sheldon; for all the money and effort buying and wrapping gifts, the activity “apparently contributes little to holiday joy”.

I am not sure atheists would feel better if they headed to church, nor that people who dislike their relatives should seek them out anyway. But these findings do suggest that the syrupy advice of a thousand moralising television specials — that the true spirit of Christmas is friends, family and the little baby Jesus — has something going for it.

What, then, is an undercover economist to advise for a truly merry Christmas?

First, keep the crass spending under control. It is pointless to lament the commercialisation of Christmas, which is not new. Santa Claus appears in advertisements from the 1840s, Macy’s was open until midnight on Christmas Eve in 1867, and Rudolf the Red Nosed Reindeer was invented in 1939 by an advertising copywriter at Montgomery Ward who needed a free gift for shoppers.

So don’t get mad with the marketing men: get even. Commercial spaces such as shopping centres and Christmas markets lay on the sights, sounds and smells of Christmas free of charge. If you like that sort of thing, savour the atmosphere, and don’t bother with the flashily-packaged trash nobody really wants.

You can cite economist Joel Waldfogel, author of Scroogenomics (UK) (US) if you like: he has convincingly demonstrated that many Christmas presents are poorly chosen. Or you can quote Harriet Beecher Stowe, if you prefer: “There are worlds of money wasted, at this time of year, in getting things that nobody wants, and nobody cares for after they are got.” In any case, if it is the thought that counts, then think.

Second, make your own social rituals, whether it is a regular reunion with old friends, carol singing, or church on Christmas morning. There is plenty of evidence that both religious and secular Christmas rituals can improve your enjoyment of the holiday. The difficulty comes in wading through the coagulated expectations of everyone else in your social circle. Take the time to think about what you really value, discuss it with your family, and make it happen.

Third: share the chores. Women have tended to spend considerably more time on the task of shopping for and wrapping Christmas gifts, while men seem to enjoy Christmas more than women do. This may not be a coincidence.

Fourth: be grateful, and write your thank-you letters. More on this next week. Finally, don’t listen to too much Tom McRae. Merry Christmas.

Written for and first published in the Financial Times on 21 Dec 2018.

My new podcast is “Cautionary Tales” [Apple] [Spotify] [Stitcher]

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My books of the year 2019

Not all of them published this year – and of course the list is subjective.

Book that did most to change the way I thought – Caroline Criado Perez, Invisible Women. My long-time producer, Charlotte McDonald, has been trying to get me to engage with the “gender data gap” for ages, but I never really felt I got the problem. Perez has delivered a much needed correction: full of persuasive examples and analysis of areas from public policy, medicine, economics and elsewhere in which data have been gathered in such a way as to obscure or omit matters of most concern to women. I learned a lot.

Best book about numbers – David Spiegelhalter’s deep yet very readable The Art Of Statistics. Sir David is a superb explainer of statistical concepts, and here he delivers much of the material one might find in a first-year undergraduate course on statistics – yet while managing to avoid most of the technicalities. The book is full of memorable examples and crystal-clear explanations.

Best book about catastrophe – Meltdown by Chris Clearfield and Andras Tilcik. This book was up against a lot of competition, because I’ve been reading a lot about catastrophe recently – but Meltdown is fun, wide-ranging, vivid and full of clever observations. Two episodes of Cautionary Tales owe a debt to Meltdown and I strongly recommend the book.

Best book about numbers and catastrophe – Humble Pi by Matt Parker. Very funny, terrific storytelling, and despite some hair-raising tales very few people actually die. You’ll also learn about the mathematics behind all sorts of everyday technologies from Excel to a jumbo jet.

Best science fiction – The Last Day by Andrew Hunter Murray. I don’t read enough fiction but when I was sent an early copy of this book I found myself drawn in. Very elegantly done – a post-apocalyptic thriller in which the apocalypse is superbly inventive and the Orwellian police state brilliantly low-rent. It’s about Brexit without being about Brexit, about climate change without being about climate change, and I very much enjoyed it.

Best picture book – Sandman by Neil Gaiman. I’ve never read this classic series and after an enjoyable but slightly schlocky first volume it quickly finds its epic, whimsical, endlessly inventive stride. I’ve been reading a book every couple of months all year; what a joy. Honourable mentions.

Best coffee-table book – The Brick: A World History. I don’t own a coffee table, but goodness me this book is gorgeous.

Best business book – Range by David Epstein. Epstein nails the difficult mix of argument, evidence and story. His book is a persuasive argument for not settling down or focusing too narrowly. I explored some of the same issues in Messy but even so I ended up learning much that I didn’t know.

Best computer science book – Hello World by Hannah Fry. An expert but highly accessible account of what algorithms do, how they work, and what they’ll do to the world around us. Great fun and a model of crisp explanation.

Best self-help book – Digital Minimalism, by Cal Newport, by a long long way. I would never have found the time to read anything else if I hadn’t read this book last Christmas. Newport eschews tips and hacks and instead demands that we face up to our digital habit and make far more deliberate choices. I cannot recommend this book too strongly.

 

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‘Salvator Mundi’ and the limits of certainty

Mona Lisa may be famously inscrutable, but “Salvator Mundi” has surely replaced her as Leonardo da Vinci’s most enigmatic work. It has been two years since it was reported that the long-lost painting had been sold to a Saudi prince as a gift to the Louvre Abu Dhabi, for an astonishing $450m — two and a half times the previous record for any painting sold at auction.

Since then the unveiling has been postponed without explanation, and the painting’s whereabouts are unknown: on a yacht, says one report; in secure storage in Switzerland, says another.

No doubt the mystery of its whereabouts will be resolved. The mystery of its provenance is deeper. In 2005, “Salvator Mundi” was bought for about $1,000 at an auction in New Orleans by two art dealers, Alexander Parish and Robert Simon. (Mr Parish later told Vulture that they had been willing to go as high as $10,000, but it proved unnecessary.)

On the surface, the painting was worth little: it was in very bad shape. But Messrs Parish and Simon thought it might be by a disciple of Leonardo; in which case it might easily be worth several hundred thousand dollars — a gamble worth taking. As a painting by Leonardo’s studio, with a touch or two by the master himself, it might have been worth $20m.

So what is it? Ben Lewis, author of The Last Leonardo, notes that the debate rages “over whether it belongs in the first division autograph Leonardo category or the second division Leonardo+Workshop category”. Apparently that is a $430m distinction. And the desire for clarity is not merely financial. When we gaze at a painting on a gallery wall, we like to know.

It is hard, too, to disentangle the time-scarred original work from its substantial restoration by Dianne Modestini — which, in turn, was influenced by the close inspection of known works by Leonardo.

Yet as the criminologist Federico Varese points out, it is curious that we insist on a binary distinction. We feel powerfully that the painting is either an autograph Leonardo, or it is not. As a matter of logic that may be true, but as a matter of practicality we do not know and we will never know. There is some evidence of Leonardo’s involvement, but the evidence is circumstantial. We are relying heavily on intuition — albeit the intuition of people with deep expertise. Regrettably but unsurprisingly, the experts differ.

This is partly a problem of knowledge: we cannot travel back in time to see who painted what. But it is also a problem of definition. Philosophers might recognise the “bald man paradox” here. Plucking out a single hair from a full head of hair does not produce a bald man. Keep going, however, and baldness will result. And yet it seems absurd to identify any particular hair as the crucial one that made the difference between baldness and non-baldness. Similarly with “Salvator Mundi”: how many brushstrokes from Leonardo does it take to distinguish a workshop piece from an autograph work?

So “Salvator Mundi” is the Schrödinger’s cat of paintings — perhaps one thing, perhaps another. We can’t know.

Schrödinger’s cat discomfited the Austrian physicist Ernst Schrödinger, for good reason. But to a statistician or a social scientist, this sort of irresolvable uncertainty is part of life.

I just tossed a coin. Did it come up heads or tails? One or the other, clearly. But even after the fact, if you haven’t seen the result it is not absurd to say that there is a 50 per cent chance of either outcome. And if I then put the coin back in my pocket without checking, 50-50 is the closest we will ever get to knowing.

We should be able to live with such fuzziness. When asking a question such as “who is the greatest ever Formula 1 driver?”, we know that we can have a fun argument — Lewis Hamilton, Michael Schumacher, Ayrton Senna, Juan Fangio? And we also know that the argument cannot be resolved.

But we forget this in other parts of life. Who would be the better UK prime minister, for example, Jeremy Corbyn or Boris Johnson? Which Democratic candidate would be most likely to defeat US president Donald Trump in the 2020 elections? Is it Joe Biden, Elizabeth Warren, Bernie Sanders or Pete Buttigieg? How serious a threat is climate change, and how drastic a change is required to deal with it?

The answers matter far more than the question of how much Leonardo contributed to “Salvator Mundi”, if he contributed at all. But we will never know for sure what the answers are.

One approach to all this fuzziness is to demand sharpness. I have often written admiringly about the work of Philip Tetlock, who has examined the problem of forecasting — a field dominated by vague prognostications — by asking forecasters to make verifiable predictions with deadlines.

But there are limits. The world defies our attempts to confine it with neat definitions.

It is not wrong to debate these vast questions of policy and politics. Indeed, it is vital that we do. But it is futile to expect a certain answer.

Written for and first published in the Financial Times on 6 December 2019.

Catch up with the first season of “Cautionary Tales” [Apple] [Spotify] [Stitcher]

For more on the joys of ambiguity, try my book, Messy. 

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Cautionary Tales Ep 5 – Buried by the Wall Street crash

Two of the greatest economists who ever lived, Irving Fisher and John Maynard Keynes, thought they could predict the future and make a killing on the stock market. Both of them failed to see the Wall Street crash, the greatest financial disaster of the age – and arguably, of any age. Yet having made the same forecasting error, Fisher and Keynes went on to meet very different fates. What does it take to see into the future? And when you fail, what does it take to bounce back from ruin?

Featuring: Alan Cumming, Russell Tovey, Mircea Monroe, Rufus Wright, Ed Gaughan, and Melanie Gutteridge.

Producers: Ryan Dilley and Marilyn Rust. Sound design/mix/musical composition: Pascal Wyse. Fact checking: Joseph Fridman. Editor: Julia Barton. Recording: Wardour Studios, London. GSI Studios, New York. PR: Christine Ragasa.

Thanks to the team at Pushkin Industries, Heather Fain, Mia Lobel, Carly Migliori, Jacob Weisberg, and of course, the mighty Malcolm Gladwell.

[Apple] [Spotify] [Stitcher]

 

Further reading

 

Walter Friedman’s The Fortune Tellers is a key source on Fisher. It’s a history of all economic forecasting in the US. I loved it.

Sylvia Nasar’s excellent Grand Pursuit has much more on both Keynes and Fisher.

There are several fine journalist accounts of Keynes’s participation in the Degas auction. Try the BBC, the Wall Street Journal, or History Today.

On Keynes, the central source on his investment performances is David Chambers and Elroy Dimson. 2013. “Retrospectives: John Maynard Keynes, Investment Innovator.” Journal of Economic Perspectives, 27 (3): 213-28.DOI: 10.1257/jep.27.3.213. There’s more biographical detail in the more informal Keynes’s Way To Wealth by John Wasik.

Philip Tetlock’s original study is detailed in his subtle, scholarly and ground-breaking Expert Political Judgment. His more recent book with Dan Gardner, Superforecasting is more journalistic and covers his recent discoveries. Both books are very good, but quite different in style.

The case of Dorothy Martin and the UFO cult is told first hand by Festinger and his colleagues in When Prophecy Fails. There’s further discussion in Mistakes Were Made (But Not By Me), an excellent guide to all the ways in which we can fail to notice we’re wrong, by Carol Tavris and Elliot Aronson.

 

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How to survive an election with your sanity intact

A week to go — or eleven months, if you’re a US voter — and the time has come to share with you my handy guide to surviving an election.

Step one: think about your goals. Mine are to keep my cool, keep my friends, learn a little about the world and cast my vote wisely. You might well share these goals — but bear in mind that most of the people you will encounter on the news or on social media have very different aims in mind: they would like you to be excited, if not downright angry. Therein lie the clicks, the views and sometimes the votes, too.

It follows that we need to be thoughtful about what sort of political news we watch and read. There is plenty of excellent analysis out there, but one needs to seek it out. Twitter has its merits as well as its faults, but it has been a while since I saw a really good explainer go viral on Twitter.

Step two: find out about the issues. I can think of a good newspaper that provides detailed analysis of policies, but it is not the only source. There is a rich seam of blogs run by academics, while think-tanks such as the Institute for Fiscal Studies, the Resolution Foundation, The King’s Fund and many others have claim — justifiably — to provide unbiased and dispassionate analysis. Others clearly lean to the political left or right, but even those are far more likely to educate you about a given policy issue than watching the television news or reading your Facebook feed.

I realise that nobody is going to plough through all those policy papers. Instead, pick a topic that matters to you — maybe climate change, maybe Brexit, maybe healthcare — and read a few pages of wonkery. I’d be surprised if you don’t learn something both interesting and valuable within five minutes.

Step three: don’t obsess about all the lies. The use of the lie in politics is mutating. Once politicians made questionable claims in the hope that the deceit would pass unchallenged. These days, one of the weapons of political warfare is to make a false claim in the full expectation that it will be rebutted, and the outrage about the lie will crowd out other stories. (See also: “£350m a week for the National Health Service”.) By all means shoot down the lie — but then move on.

There are people whose heroic task is to fact-check all the important claims made in media interviews, debates, election leaflets and on social media. Given that some fairly dark propaganda can be quietly circulated on social media, this is not an easy task. As Joseph O’Leary, senior fact-checker at the UK charity Full Fact observes: “fact checkers are only as good as the claims they notice”. There is also the “bullshit asymmetry” principle: it takes 10 times as much effort to refute bullshit as it does to produce it.

Professional fact-checkers could be forgiven for being outraged at the task our political discourse has handed them. Yet the best of them are rigorous, fair, transparent — and careful not to amplify false claims by endlessly repeating them as part of a fact-check.

Step four: vote tactically. Yes, it would be nice to have a rational electoral system, but we don’t. So check out how the votes went in your local area in 2017 and 2015. (For goodness’ sake, don’t trust the bar graphs on any election leaflets shoved through your door.) In most cases, the choice is simple: pick whichever you prefer of the two leading candidates in your area. For extra credit, you might try to find out whether the incumbent lies on the sane or insane wing of their own party — although many of the sane incumbents seem to be quitting politics, which is not encouraging.

I realise it might be tempting to exercise a protest vote, and that is every voter’s right. But bear in mind that the smug glow of ideological purity had better feel pretty good to make it worthwhile, because some of those protest votes are going to prove awfully counterproductive.

Step five: if you’re having a conversation about politics, try to learn something. There is no point in having a shouting match with friends and neighbours, and it is equally fruitless to sit around with like-minded people commiserating with each other about how terrible the other lot are. Why not, instead, ask what people have found most noteworthy about the campaign? An intriguing person, maybe, or a weird policy, a columnist or a podcast they’d recommend? When someone expresses an opinion, whether you agree or disagree, ask them to elaborate.

Be curious. You might learn something — and the psychological research suggests that they might learn something, too. In my own fond recollection — which is, no doubt, a nostalgic delusion — politics used to take the form of an argument between reasonable people about the best way to solve the country’s problems. If it is now evidence-free rather than evidence-based, insulting rather than respectful, destructive rather than constructive, then that’s something we need to change.

And since I can’t control what everyone else does, I suppose I’ll have to start by changing myself.

Written for and first published in the Financial Times on 15 November 2019.

My new podcast is “Cautionary Tales” [Apple] [Spotify] [Stitcher]

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Cautionary Tales Ep 4 – The Deadly Airship Race

A British Lord wanted to build the best airship in the world – and so he had two rival design teams battle it out to win the juicy government contract. Competition is supposed to bring the best out of people, but run in the wrong way it can cause people (and the things they make) to fall apart in the most horrifying ways.

Featuring: Alan Cumming, Russell Tovey, Rufus Wright, Melanie Gutteridge, Enzo Cilenti and Ed Gaughan.

Producers: Ryan Dilley and Marilyn Rust. Sound design/mix/musical composition: Pascal Wyse. Fact checking: Joseph Fridman. Editor: Julia Barton. Recording: Wardour Studios, London. GSI Studios, New York. PR: Christine Ragasa.

Thanks to the team at Pushkin Industries, Heather Fain, Mia Lobel, Carly Migliori, Jacob Weisberg, and of course, the mighty Malcolm Gladwell.

[Apple] [Spotify] [Stitcher]

 

Further reading

 

Two recent and comprehensive books are Bill Hammack’s Fatal Flight (about the R101) and John Anderson’s Airship on a Shoestring. 

An excellent – but one-sided – account of the airship race is Nevil Shute Norway’s Slide Rule, while the case for Lord Thomson’s defence is put in Peter Masefield’s To Ride The Storm.  Alfred Roubaille’s description of the crash is from Nigel Blundell’s The World’s Greatest Mistakes.

The BBC made a documentary about R101, including eye-witness accounts. So did the History Channel.

The academic studies:

Dan Ariely, Uri Gneezy, George Loewenstein, Nina Mazar, “Large Stakes and Big Mistakes” The Review of Economic Studies, Volume 76, Issue 2, April 2009, Pages 451–469, https://doi.org/10.1111/j.1467-937X.2009.00534.x

Robert Drago and Gerald T Garvey “Incentives for Helping on the Job: Theory and Evidence”

Journal of Labor Economics, 1998, vol. 16, issue 1, 1-25 http://dx.doi.org/10.1086/209880 

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Why we should all be playing games

“British politics is full of people who think they’re playing mah-jong but they’re actually playing Ludo.” Wise words from Robert Shrimsley on the Financial Times’s politics podcast — but I fear the situation is even worse. British politics may be full of people who aren’t playing any good games at all. That would be a shame for them, and for us. Games are wonderful; we should all be playing more of them.

In truth, any sort of serious hobby seems to be valuable. Many of the smartest people have at least one: Albert Michelson, the physicist who measured the speed of light and won a Nobel Prize, painted well, played the violin, and was a seriously good billiards player.

“Billiards is a good game,” he once announced. But it was not as good as painting. Painting was not as good as music. “But then music is not as good a game as physics.” Michelson was not alone. One long-running study of scientists, begun by the psychologist Bernice Eiduson in 1958, found that the most successful scientists tended to pursue arts, sports or music to a high level. In contrast, the less successful scientists “had no comments on hobbies or artistic proclivities either because they had none or found them irrelevant to their work”.

But of all the deep pastimes one might embrace there’s nothing quite like a tabletop game to sharpen the mind, strengthen friendships and ease the soul. A quick internet search will produce countless explanations of why boardgames are good for children — they get them away from screens and social media, subvert family hierarchies, allow them to experience success and failure in a safe environment, and teach social and cognitive skills.

I have no argument with any of that, but games should not just be for children. All those benefits accrue to adults, too.

Almost a decade ago I interviewed Klaus Teuber, creator of The Settlers of Catan, one of the best and most successful modern boardgames. “You can know someone for 10 years,” Mr Teuber told me, “and the first time you play a game with them you see a side you never saw before.”

It’s true. A good game is a refreshing change of tone from gossip or dinner party chit-chat about politics or house prices, yet it remains a convivial activity for consenting adults.

Games can be a serious matter, of course. War games have been used by the military since the early 1800s, when the Prussian army’s love of Kriegsspiel was widely thought to be one of the secrets of their military success. A tabletop war game uses models to represent troops, dice to represent the vicissitudes of war, and an umpire to introduce the possibility of miscommunication. It teaches deeper lessons than simply thinking and planning, while being just as safe.

Thomas Schelling — a cold war strategist and winner of the Nobel Prize in economics — once wrote: “One thing a person cannot do, no matter how rigorous his analysis or heroic his imagination, is to draw up a list of things that would never occur to him.” War games offer a solution to that conundrum: the experience of trying to outwit a gaming opponent makes the unimaginable start to seem familiar.

More elaborate field exercises can produce a great deal of understanding. Steven Johnson, author of Farsighted, argues that a major US Navy war game exercise in 1932, “Fleet Problem XIII”, highlighted the vulnerability of US naval bases to attack from Japan. The game produced the insight, if anyone cared to use it.

But the highest form of gaming is, of course, the role-playing game, of which Dungeons & Dragons is the most famous example. Role-playing games are notoriously difficult to describe, but they combine the dice-rolling rules of a war game with the long-running characters of a soap opera, and a healthy dose of improvised theatre and “let’s pretend”.

Martin Lloyd, the creator of the children’s role-playing game Amazing Tales, argues that such games have all sorts of benefits: they bring friends together, inspire individual and collective creativity and require problem-solving. They have sometimes been used with more ambitious therapeutic goals in mind — for example, to help people on the autism spectrum develop social skills, and as an alternative to group therapy for military veterans. But for most gamers the point of games is that they are enjoyable in a deeper way than most mere entertainments. They create moments of enchantment to rival the finest music or theatre. A good game has you solving puzzles, throwing yourself into improvised acting, and then helpless with tears of laughter. The friendships I’ve forged over the gaming table have been the ones that have lasted.

But Mr Teuber put it best. “Every day we work hard and we make mistakes and we are punished for those mistakes. Games take us to another role where you can make mistakes and you don’t get punished for them. You can always start another game.”

 

Written for and first published in the Financial Times on 1 November 2019.

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Cautionary Tales Ep 3 – LaLa Land: Galileo’s Warning

Galileo tried to teach us that when we add more and more layers to a system intended to avert disaster, those layers of complexity may eventually be what causes the catastrophe. His basic lesson has been ignored in nuclear power plants, financial markets and at the Oscars…all resulting in chaos.

Featuring: Archie Panjabi, Mircea Monroe, Enzo Cilenti, Ed Gaughan and Rufus Wright

Producers: Ryan Dilley and Marilyn Rust. Sound design/mix/musical composition: Pascal Wyse. Fact checking: Joseph Fridman. Editor: Julia Barton. Recording: Wardour Studios, London. GSI Studios, New York. PR: Christine Ragasa.

Thanks to the team at Pushkin Industries, Heather Fain, Mia Lobel, Carly Migliori, Jacob Weisberg, and of course, the mighty Malcolm Gladwell.

 

Further reading

Among many, many journalistic accounts of the LaLa Land / Moonlight mix-up, try the Hollywood Reporter’s oral history and the BBC’s Truth Behind Envelopgate.

Benjamin Bannister on typography at the Oscars.

Galileo’s Dialogues Concerning Two New Sciences.

Charles Perrow’s Normal Accidents introduces the idea of complex, tightly-coupled systems and has good accounts both of the Three Mile Island and the Fermi reactor accidents. Just after we’d recorded the episode, I heard the sad news that Charles had died on November 12th. He’ll be missed.

The official report of the commission investigating Three Mile Island, chaired by John Kemeny.

Meltdown by Chris Clearfield and Andras Tilcik first drew the link between Perrow’s work and the La La Land fiasco.

Dowell and Hendershott’s classic article about backfiring safety systems is No Good Deed Goes Unpunished: Case Studies of Incidents and Potential Incidents Caused by Protective Systems.

Don Norman’s The Design of Everyday Things discusses confusing instrumentation.

My previous article What Banks Should Learn From A Nuclear Reactor uses Charles Perrow’s ideas to draw parallels between banking and nuclear accidents.

Andrew Ross Sorkin’s Too Big Too Fail has the scoop on what happened when Bob Willumstad met Tim Geithner.

The new three-envelope system was described in Vanity Fair.

 

 

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What exactly is so bad about uncertainty, anyway?

The one certainty in politics at the moment is that it is uncertain. From a British point of view, there is the apparently endless game-playing over Brexit — coupled with the looming prospect of an unpredictable and highly consequential general election. I’m sure I don’t need to elaborate on the situation in the US.

The received wisdom is that political uncertainty is bad news, at least for the economy. Is that really true? And, if so, why? If we understand the problem a little better we may also have a sense of whether there is any chance of improvement.

The evidence from the research of various economists suggests that uncertainty is indeed a brake on economic activity. Nuno Limão and colleagues have shown that uncertainty over trade policy is itself a kind of barrier to trade. Meredith Crowley and colleagues have found that UK companies were less likely to enter EU markets, and more likely to exit, if those markets were more exposed to the risk of a breakdown in Brexit negotiations. And Nicholas Bloom has found that uncertainty — measured in various ways — tends to be a cause of recessions as well as a consequence. So the problem is real, but what exactly is causing it?

One theory is that there is something deeply unsettling about ambiguity. Back in 1961, a promising young economist named Daniel Ellsberg explored this issue in the Quarterly Journal of Economics. (Mr Ellsberg later became far better known as the whistleblower who leaked the Pentagon Papers.)

Mr Ellsberg imagined a gamble involving two urns, each known to contain a hundred red or black balls in total. The first urn contains 50 red and 50 black balls. The second has an unknown mix. Let’s say I offer to pay you $100 if the ball you draw out of an urn is red. From which urn would you prefer to pick — the first or the second? Most people prefer the first. But people also prefer the first urn if they are paid $100 for a black ball instead. It’s not that they feel their chances are better — logically, the first urn cannot possibly be a better choice for both red and black. It’s just that . . . well, the known risk feels less uncomfortable than the ambiguous risk.

That aversion to the unknown may explain part of why uncertainty seems to corrode the foundations of the economy. But I suspect that the main problem is something far less ethereal.

Imagine you are an entrepreneur with plans and permits to build, say, a cardboard recycling facility in Peterborough. If there is a fairly soft Brexit, or no Brexit at all, you think that a large plant would be profitable. If there is a hard Brexit, or even no deal, you still think you can make money with a smaller installation. What do you do?

Simple: you wait. You wait even though you would want to build some kind of factory under any circumstances. You wait because you will make a better decision if the Brexit uncertainty resolves itself. The uncertainty makes it more profitable to delay.

That’s the theory. What do the data suggest? In the UK, private sector investment is remarkably weak, given that the UK has not been in a recession. In fact, it is hard to find a parallel where a growing UK economy has been accompanied by such feeble investment. This weakness has persisted since about the time of the 2016 referendum. It is weak both historically and compared with the situation in the US and Germany. Perhaps that is all a coincidence, but I rather doubt it.

In the face of uncertainty, companies will value flexibility. The economists Benjamin Nabarro and Christian Schulz, contributing to the Green Budget of the Institute for Fiscal Studies, make an intriguing argument. They speculate that given persistent Brexit uncertainty, this desire for flexibility is being satisfied by hiring workers instead of making large investments in capital. That is a way to expand output without doing anything irreversible. It’s good news for jobs, and bad news for investment and productivity.

My example of the cardboard recycling plant implied that uncertainty will tend to depress investment, but uncertainty is not always an obstacle in that way. If the building permit for that recycling facility was about to expire, making this a now-or-never decision, you would find yourself making your best guess and building something. If the uncertainty would not be resolved until 2025, you might also decide the costs of delay were too great, and build immediately.

There are even cases where uncertainty encourages exploratory investments: not knowing what will happen, you try to ensure that you have a toehold in every possible future. For example, the mere possibility that a large country’s government might get serious about climate change encourages research into low-carbon technologies.

Not all uncertainty depresses investment, then. But if there is a scenario guaranteed to put everyone’s plans on ice, it is this: a major decision with weighty consequences that is forever being postponed. If that reminds you of anything, you are not alone.

 

Written for and first published in the Financial Times on 25 October 2019.

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