For people always applaud the most for the song that is newest

From Homer, Odyssey I.351-352

For people always applaud the most for the song that is newest to circulate among the listeners.

Is there anything those ancient Greeks didn't get to first?

Real expertise predicated on predictability: no predictability, no expertise

In that article, Don’t Blink! The Hazards of Confidence by Daniel Kahneman, Kahneman is making the suggestion that in systems that are complex, chaotic, and loosely coupled (ex. stock markets), there is little comprehension about the linkage between cause and effect, so participants are not able to extract useful information and therefore their performance is going to be random. In systems that are simple, stable, and have good feedback systems, practitioners have the capacity to develop and demonstrate expertise and accuracy of forecasts, i.e. their performance will be predictable.

The corollary insight, such as it is, is that where you do not have predictable performance, you are likely dealing with a complex, chaotic, loosely coupled system.

Open societies have unequal outcomes, societies that pursue equal outcomes sacrifice openness

From The Paradox of the New Elite by Alexander Stille one might conclude that inclusive societies (ease of immigrant absorption) tend to yield unequal market outcomes (growing income disparity). This describes the US. Conversely, the data suggests that societies that pursue an equalization of outcomes are more likely to reject non-members. This describes OECD Europe.

This set of observations seems to relate to the observation by Milton Friedman IIRC, that you can have a generous welfare system or an open immigration policy but you can't have both.

This is an interesting insight by Stille.

Decision-Making, Limits and Pitfalls

Following on from The illusion of validity.

Kahneman's discussion leads to the modification of this decision-making graphic that I created identifying the four different modes of decision-making based on their present:futurity, tactical:strategic, incremental:consequential and reversible:irreversible orientations. All decisions are made in a context of more or less time available and we tend to default to that mode of decisioning which is most relevant to the time constraint rather than the mode of decision making relevant to the nature and impact of the decision as we ought to do.

This new version incorporates the delimiters associated with each mode of decision-making. Experiential, for example, depends on creating useful narrative stereotypes but there is a boundary of stereotypes beyond which we will not accept for any of a variety of reasons - lack of utility, conflict with values, incongruence with assumptions, etc. The other modification is at the center of the graphic. Once we have digested inchoate data and made sense of it, i.e. arrived at a decision using the four modes of decision-making, we then undertake action based on that decision. There is the direct set of actions necessary for the here and now, and then there are the more policy related actions relevant to the strategic, future state.

A final iteration prompted by Kahneman's comments. Each mode of decision making (heuristic, experiential, analytic and profound) is subject to biases and effects pertinent to that particular mode. In Kahneman's article he is focusing on the tendency to lock on to narrative coherence. We like stories that make sense and hang together and we are biased towards those coherent stories regardless of what else we might know about the utility of those narratives (stereotypes). So what are some of the common biases and effects?

The illusion of validity

From Don’t Blink! The Hazards of Confidence by Daniel Kahneman.

Quite intriguing.

The statistical evidence of our failure should have shaken our confidence in our judgments of particular candidates, but it did not. It should also have caused us to moderate our predictions, but it did not. We knew as a general fact that our predictions were little better than random guesses, but we continued to feel and act as if each particular prediction was valid. I was reminded of visual illusions, which remain compelling even when you know that what you see is false. I was so struck by the analogy that I coined a term for our experience: the illusion of validity.

I had discovered my first cognitive fallacy.

[snip]

The confidence we experience as we make a judgment is not a reasoned evaluation of the probability that it is right. Confidence is a feeling, one determined mostly by the coherence of the story and by the ease with which it comes to mind, even when the evidence for the story is sparse and unreliable. The bias toward coherence favors overconfidence. An individual who expresses high confidence probably has a good story, which may or may not be true.

[snip]

I coined the term “illusion of validity” because the confidence we had in judgments about individual soldiers was not affected by a statistical fact we knew to be true — that our predictions were unrelated to the truth. This is not an isolated observation. When a compelling impression of a particular event clashes with general knowledge, the impression commonly prevails.

[snip]

Although professionals are able to extract a considerable amount of wealth from amateurs, few stock pickers, if any, have the skill needed to beat the market consistently, year after year. The diagnostic for the existence of any skill is the consistency of individual differences in achievement. The logic is simple: if individual differences in any one year are due entirely to luck, the ranking of investors and funds will vary erratically and the year-to-year correlation will be zero. Where there is skill, however, the rankings will be more stable. The persistence of individual differences is the measure by which we confirm the existence of skill among golfers, orthodontists or speedy toll collectors on the turnpike.

[snip]

More important, the year-to-year correlation among the outcomes of mutual funds is very small, barely different from zero. The funds that were successful in any given year were mostly lucky; they had a good roll of the dice. There is general agreement among researchers that this is true for nearly all stock pickers, whether they know it or not — and most do not. The subjective experience of traders is that they are making sensible, educated guesses in a situation of great uncertainty. In highly efficient markets, however, educated guesses are not more accurate than blind guesses.

[snip]

The illusion of skill is not only an individual aberration; it is deeply ingrained in the culture of the industry. Facts that challenge such basic assumptions — and thereby threaten people’s livelihood and self-esteem — are simply not absorbed. The mind does not digest them. This is particularly true of statistical studies of performance, which provide general facts that people will ignore if they conflict with their personal experience.

Kahneman then concludes:

To know whether you can trust a particular intuitive judgment, there are two questions you should ask: Is the environment in which the judgment is made sufficiently regular to enable predictions from the available evidence? The answer is yes for diagnosticians, no for stock pickers. Do the professionals have an adequate opportunity to learn the cues and the regularities? The answer here depends on the professionals’ experience and on the quality and speed with which they discover their mistakes. Anesthesiologists have a better chance to develop intuitions than radiologists do.

This doesn't seem quite right to me. "Is the environment in which the judgment is made sufficiently regular to enable predictions from the available evidence?" It seems to me as if this is incomplete and that the question should actually be "Is the relationship between cause and effect well understood and stable?

Also, "Do the professionals have an adequate opportunity to learn the cues and the regularities?" seems too unspecific. I would think that it ought to be something more like "Is there consequential feedback that is timely, accurate, relevant, and contextual?"

Other nations seem to face the same challenge: either inclusive, or economically just.

From The Paradox of the New Elite by Alexander Stille. Some very interesting observations and questions.

It’s a puzzle: one dispossessed group after another — blacks, women, Hispanics and gays — has been gradually accepted in the United States, granted equal rights and brought into the mainstream.

At the same time, in economic terms, the United States has gone from being a comparatively egalitarian society to one of the most unequal democracies in the world.

The two shifts are each huge and hugely important: one shows a steady march toward democratic inclusion, the other toward a tolerance of economic stratification that would have been unthinkable a generation ago.

The United States prides itself on the belief that “anyone can be president,” and what better example than Barack Obama, son of a black Kenyan immigrant and a white American mother — neither of them rich.

[snip]

It’s a surprising contradiction. Is the confluence of these two movements a mere historical accident? Or are the two trends related?

Other nations seem to face the same challenge: either inclusive, or economically just. Europe has maintained much more economic equality but is struggling greatly with inclusiveness and discrimination, and is far less open to minorities than is the United States.

European countries have done a better job of protecting workers’ salaries and rights but have been reluctant to extend the benefits of their generous welfare state to new immigrants who look and act differently from them. Could America’s lost enthusiasm for income redistribution and progressive taxation be in part a reaction to sharing resources with traditionally excluded groups?

[snip]

Inequality and inclusion are both as American as apple pie, says Jerome Karabel, a professor of sociology at the University of California, Berkeley, and author of “The Chosen,” about the history of admission to Harvard, Yale and Princeton. “I don’t think any advanced democracy is as obsessed with equality of opportunity or as relatively unconcerned with equality of condition,” he says. “As long as everyone has a chance to compete, we shouldn’t worry about equality. Equality of condition is seen as undesirable, even un-American.”

[snip]

“After the immigration reform of 1965, this country went from being the United States of Europe to being the United States of the World. All with virtually no violence and comparatively little trauma,” Professor Karabel said. This is no small thing, particularly when you compare it to the trauma experienced by many European societies in absorbing much lower percentages of foreign-born citizens, few of whom have penetrated their countries’ elites.

Usually speaking in riddles or gibberish

Heh. An extended allegory of Alice in Wonderland and American politics in American Wonderland by Morton Keller.

What do we find in the fantastical worlds of Wonderland and the mirror-image Looking-Glass House through which Alice passes? They are populated with bizarre collections of sorts-of-people and not-quite-right animals, usually speaking in riddles or gibberish. They engage in endless, often nonsensical disputations, mutual threats, and generally antisocial behavior: a not inapt metaphor for our political culture. “It’s really dreadful the way all the creatures argue. It’s enough to drive one crazy!” says Alice, as if she had just emerged from a bout of listening to a panel “discussion” on cable television, or reading what passes for “comments” on the internet.

Unite us into teams, divide us against other teams, and blind us to the truth

From an essay post, The Illusion of Asymmetric Insight by David McRaney.

As psychologist Jonathan Haidt says, our minds “unite us into teams, divide us against other teams, and blind us to the truth.”

Depending whom you ask, you’ll hear that the problem is too little money. Or it’s too . . .

Andrew J. Rotherham Forget Wall Street. Go Occupy Your Local School District has a convenient listing of root causes of school education failures:

Depending whom you ask, you’ll hear that the problem is too little money. Or it’s too much money and too little performance. Or poverty. Or lack of standards. Or lousy curriculum. Or teacher effectiveness. Or archaic rules and regulations. Or lack of innovation. Or lack of choice. Or too much power in the hands of the teachers unions. Or too little power in the hands of teachers.

To which I would add some other commonly ascribed root causes such as poor facilities, administration bloat, too much testing, unaligned culture, family environment, too little time in school, too long a summer break, family demographics (single parent), poor role models, etc.

All of these are potential root cuases, and all will prove to be actual root causes in some instances. But not all of them are equally contributive to poor results all the time, everywhere. And some of them are masks for the real underlying issues. Poverty is not itself the cause of poor results but some of the burdens of poverty are - the trick is to identify those specific burdens and address them rather than the nebulous concept of poverty. A rigorous root cause analysis of systemic poor results will force some unpleasant truths to be faced but we cannot move forward until we quit chasing generic chimera and start tackling concrete problems.

The first lesson of economics is scarcity

From Thomas Sowell.

The first lesson of economics is scarcity. There is never enough of anything to fully satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.