Links for June

In favour of about one citizen in five hundred, who, by education or practice in scribbling, has acquired a tolerable style as to grammar and construction, so as to bear printing; or who is possessed of a press and a few types. This five hundredth part of the citizens have the privilege of accusing and abusing the other four hundred and ninety-nine parts at their pleasure; or they may hire out their pens and press to others for that purpose.

–Benjamin Franklin, “An Account of the Supremest Court of Judicature in Pennsylvania, viz., The Court of the Press”

Food

Education

America and Americans

Nature

“The Ask” is an Entrepreneur’s Core Skill

+ Other Notes on Entrepreneurial Expertise

I’ve been going through the second edition of the Cambridge Handbook of Expertise after reading the first years ago, and was delighted to find the new edition has a chapter on excellence among entrepreneurs.

Some highlights:

Formal Education? Who Needs It

Initial studies suggested that since many entrepreneurs had little formal education, the skills and knowledge needed to start up and manage new ventures must be developed from on-the-job experience (Cooper, Gimeno-Gascon, & Woo, 1994; Reuber & Fischer, 1994). Through experience, entrepreneurs accumulate knowledge about products, technologies, markets, customers, investors and suppliers, etc. Researchers observed that venture investors (e.g. angel funders and venture capitalists) prioritized entrepreneurial experience in their evaluation and selection of venture funding proposals (Zacharakis & Meyer, 2000). Consequently, numerous entrepreneurship studies acknowledged and built on Becker’s (1964, 1975) works on the role of human capital (defined primarily as education and job training) in entrepreneurial success. Findings showed that success in venturing is significantly higher for specific, task related human capital than for general education (Unger, Rauch, Frese, & Rosenbusch, 2011). Specific human capital here refers to skills and knowledge acquired in previous new ventures or in the same industry as the new venture.

I could’ve sworn I saw something a couple months back about self-made millionaires (or some similar demographic) being much less college educated than one might anticipate but, googling now, I’m not finding it.

Anyway, this is more evidence that Bryan Caplan is right about everything (although I’m thinking mostly of his book here).

Experts Focus on Markets and Metrics

The authors noted that the cognitive frameworks used by experienced entrepreneurs, “tended to focus on factors pertaining to financial success, rejecting ideas for new products or services that did not appear to offer manageable risk, the capacity to generate positive cash flow, and so on” (Baron & Ensley, 2006, p. 1340). By contrast, first-time entrepreneurs highlighted the novelty of the business idea, its competitive superiority, new technology, and their gut feel about the opportunity.

The effect size here has to be enormous, as this is something you can pick up on just by reading through, say, anything Patrick McKenzie has ever written. Here’a one example:

There are, broadly speaking, two ways to sell SaaS. The selling model dictates almost everything else about the SaaS company and the product, to a degree which is shocking to first-time entrepreneurs. One of the classic mistakes in SaaS, which can take years to correct, is a mismatch between a product or market and the selected model to sell it on.

You will find that the sales model for SaaS defines much more about a product (and company) than other distinctions, like whether a company sells to customers (B2C) or businesses (B2B), whether it is bootstrapped or riding the VC rocket ship trajectory, or what technology stack it is built on.

–from Patrick’s “The Business of SaaS”

This theme appears in Rob Walling’s Start Small, Stay Small, too, with sections like:

Math is the science behind every business in the world, whether they realize it or not. With internet marketing, the math involves views, clicks, click through rates, unique visitors, goals, conversion rates, gross profit and net profit.

[…] …it’s all about Math.

Notice how both Patrick and Rob demonstrate here the core thing that distinguishes an expert from an amateur: the ability to extract abstract, structural, information-dense features from their domain and communicate them as superior organizing principles. Contrast that with the novice’s fumbling surface-level categorizations.

Developing Skills Takes Less Than You Think

Fifty hours or fewer represent enough practice to become socially competent in many recreational activities (for example, driving a car). However, once individuals achieve sufficient performance, improvement plateaus because they stop paying deliberative attention to the learning process.

I’m wondering if this holds for learning guitar, a task I keep pushing off feeling it’ll take too many hours to reach “socially competent.” Certainly more than 50, right? Right?

I’m reminded too here of Scott Adam’s career advice:

If you want an average successful life, it doesn’t take much planning. Just stay out of trouble, go to school, and apply for jobs you might like. But if you want something extraordinary, you have two paths:

  1. Become the best at one specific thing.
  2. Become very good (top 25%) at two or more things.

The first strategy is difficult to the point of near impossibility. Few people will ever play in the NBA or make a platinum album. I don’t recommend anyone even try.

The second strategy is fairly easy. Everyone has at least a few areas in which they could be in the top 25% with some effort.

Fanatical Confidence

According to Knight (1921), while risk consists of unknowns that are drawn from a known distribution, uncertainty has to do with unknown and even unknowable distributions. Therefore, entrepreneurial expertise consists of heuristics that minimize or eliminate reliance on prediction. Predictive strategies are more useful in dealing with risk. Effectual heuristics help deal with uncertainty. Expert entrepreneurs generally rejected heuristics based on prediction and forecasting. In the words of one of the experts: “I’ve always tended to be very skeptical about market research studies” (E14, Sarasvathy, 1998). Instead, their experience encouraged heuristics that sought to exert control over the environment. They shunned the notion of “placing bets” based on business plans, and in general challenged assumptions underlying predictive reasoning. In their view the future is an endogenous creation shaped by willful human beings. Hence it is not very useful to invest in predicting it. Unlike forms of expertise rooted in prediction, and typically associated with errors in judgment (Shanteau, 1992), effectuation internalizes “complex indeterminate causation” (Hoffman, Klein, & Miller, 2011) by incorporating co-creative human activity into the heuristics, to shape desired outcomes.

entrepreneur-jeb.jpg

Peter Thiel has a chapter arguing near exactly this in his Zero to One, “Can You Control Your Future?”:

You can expect the future to take a definite form or you can treat it as hazily uncertain. If you treat the future as something definite, it makes sense to understand it in advance and to work to shape it. But if you expect an indefinite future ruled by randomness, you’ll give up on trying to master it.

Indefinite attitudes to the future explain what’s most dysfunctional in our world today. Process trumps substance: when people lack concrete plans to carry out, they use formal rules to assemble a portfolio of various options. This describes Americans today. In middle school, we’re encouraged to start hoarding “extracurricular activities.” In high school, ambitious students compete even harder to appear omnicompetent. By the time a student gets to college, he’s spent a decade curating a bewilderingly diverse résumé to prepare for a completely unknowable future. Come what may, he’s ready—for nothing in particular. A definite view, by contrast, favors firm convictions. Instead of pursuing many-sided mediocrity and calling it “well-roundedness,” a definite person determines the one best thing to do and then does it. Instead of working tirelessly to make herself indistinguishable, she strives to be great at something substantive—to be a monopoly of one.

Intriguingly, invert this and you end up with the also very popular The Lean Start-Up. Who’s right? Maybe you don’t have to choose: small multi-armed bandit-style bets with an initial bias toward exploration that gradually shifts toward exploiting now known-good options might feel a lot like, from the inside, an ever expanding sense of agency and internal locus of control.

Speaking of inverting, Peter’s advice here is also the precise opposite of Scott Adams’ above.

“The Ask” is the Entrepreneur’s Core Skill

Given that entrepreneurship is nigh by-definition fuzzily defined, what is the core skill all entrepreneurs are practicing? “The Ask,” argue the authors.

In our search for such an activity conducive to purposeful and deliberate practice in entrepreneurship, we observed one in which entrepreneurs engage across all types of ventures, geographies, and times. We call this activity “The Ask.” In building a venture, entrepreneurs continually and iteratively interact with other people. Almost all of these interactions involve Asks. Asks can cover a variety of inputs necessary to creating a new venture that may include both intangibles (advice, introductions to network contacts) and tangibles (resources such as customer orders, supplier materials, labor, and money). While the “what” of The Ask differs across stages of the venture and particular stakeholders and situations, our observation is that the “how” of The Ask has repeatable common elements capable of continual practice and improvement. Likewise, while the “who” of The Ask differs (the identity of The Askee, from family, close friends, and network contacts to complete strangers), the activity of asking remains comparable.

This led us to posit “The Ask” as one of the most important activities on which purposeful practice may be applied to improving entrepreneurship. Most importantly, asking is intrinsic to the early stages of the entrepreneurial process. Whether they like doing it or not, entrepreneurs have to engage in The Ask on multiple occasions each day in the course of launching a new venture. Hence repeated practice of The Ask is an inevitable feature of the startup environment (Ericsson & Smith, 1991).

The Ask itself may not be inherently motivating for an entrepreneur but the larger objective is motivating, e.g. of successfully establishing a new venture. This provides the entrepreneur with powerful incentives for getting better at asking. Furthermore, an Ask typically creates spontaneous natural feedback for an entrepreneur, whether verbal or non-verbal, from The Askee or from surrounding observers. Immediate feedback in the form of rejection, acceptance (with the provision of new resources), or the introduction of new alternatives (perhaps an introduction to another person) provides the sort of feedback necessary for diagnosing failures and identifying improvement opportunities (Ericsson, 2004, p. S77). Lastly, The Ask may be tailored to the skill level of the entrepreneur. Indeed, we can precisely conceptualize a natural progression from apprentice to higher proficiency levels of asking.

Here I’m again inclined to offer Patrick McKenzie as a concrete example. I can think of nothing that betters exemplifies “the Ask” than his approach to developing Appointment Reminder:

Three years ago, I had had the idea for Appointment Reminder, and wanted to discover whether businesses had a large enough no-show problem to justify paying $30 a month for it. I don’t have great access to non-technical small business owners, so I just decided to pretend I was an extrovert for a day, and interview people door to door in Chicago.

Here was my pitch, which I made to every massage therapist and hair salon owner I could find just doing a breadth-first search down Michigan Avenue:

Hiya, do you take walk-ins? Are you the owner? Great, can I book the thirty minute option for name-a-service? Great, actually, I’ve got a request. More than the name-a-service, I am really interested in the business of name-industry-here and want to talk to you about it a bit. I’m happy to pay for your time. Does that work for you?

I lost my notebook where I kept the interview results (d’oh), but my recollection was that only one person out of a dozen plus actually took my money for this. Most were happy to talk, since unscheduled time for them in the early afternoon had a predicted value of zero anyhow. (n.b. That was, in itself, a useful lesson.)

Did you catch how he was surprised to discover how friendly everyone was? This segues perfectly into my favorite bit of this post:

It turns out that these perceptions significantly affect an individual’s performance in the activity of asking in a strongly negative way, i.e. help seekers underestimate the likelihood that others will help them by as much as 50 percent. Non-expert askers appear to systematically believe that others will say no, even when they have no hard evidence on which to base such an assumption. Expert entrepreneurs, however, achieve better calibration through the actual practice of asking.

People tend to underestimate how willing others are to help them by a staggering 50%, except for seasoned entrepreneurs who, with practice, have learned the monstrous truth of it: people are secretly fantastic, want you to succeed, and are willing to help you get there. (!!!!)

Links for May

Any point of a rhizome can be connected to anything other, and must be.

–Deleuze and Guattari, A Thousand Plateaus

  • Who fucked up the most in human history? Dr. Thomas Midgley. “He was an ambitious scientist who had the idea to put lead in fuel before we knew how bad it was. Then he created CFCs for refrigerators that we later learned are responsible for eating through the ozone layer. Then, when he was old an bed ridden, he designed a contraption to make walking and standing etc easier. His contraption failed and killed him.
  • Inkjet printers continue to be a strong candidate for Worst Technology Ever: the “ink evaporates out of the cartridge if you don’t use it. In about a year a full cartridge will be empty just from evaporation.”
  • “‘Uncleftish Beholding” (1989)’ is a short text written by Poul Anderson. It is written using almost exclusively words of Germanic origin (Anglish), and was intended to illustrate what the English language might look like if it had not received its considerable number of loanwords from other languages, particularly Latin, Greek and French.” Opening paragraph: “For most of its being, mankind did not know what things are made of, but could only guess. With the growth of worldken, we began to learn, and today we have a beholding of stuff and work that watching bears out, both in the workstead and in daily life.”

Sex

Politics

Drugs

Brains

Links For December

Links For November

Web Roundup: Links for October

They sift the human storm for souls, eat flesh of reason, fill tombs with sinners. They frenzy forth… Such are the autumn people.
–Ray Bradbury

It’s October, which implies more links. Last month’s links are here.

A 60-Second Exercise That Boosts Goal Achievement By 20%

The hero of our tale, Jason Padgett.

The hero of our tale, Jason Padgett.

(Content note: this is an example of what I send out to email subscribers. You can sign up to receive more like it on any of the many forms scattered throughout the website, like the one at the bottom of this post.)

In 2002, Jason Padgett got into a fight. It was the fight of the decade, maybe the century. Not because Jason trounced his two assailants (he didn’t), and not because it was a fair fight — it wasn’t — but because of what happened the next morning.

But, wait, rewind a little. Let me tell you about Jason before everything changed.

Jason Padgett: Jock, Underachiever… Time Traveler?

The year was 2002 but, looking at Jason, you wouldn’t know it.

It was as if he’d been beamed straight from the 80s. A grungy time-traveler left stranded in the future, perhaps a consequence of an evil genius’s twisted revenge plot gone awry.

His blonde hair was cut into a mullet.

Attire: t-shirt with ragged, cut-off sleeves — as if he’d gnawed them off himself, like your dog might when left alone, bored. And the finishing touch, transforming him from trucker-stop chic into a form of trailer-park fashion so common you’d mistake it for an official uniform: he tucked his browning white tee into tight, faded jeans.

Plus a leather jacket. The leather jacket.

Just as The Lord of The Rings hinged on the whims of The One Ring, Jason’s story hinges on The One Leather Jacket.

At 31, with a daughter, he looked almost like an awkward teenager, except — barring Mike Tyson and steroids — I’d never seen a teen so well-muscled.

His hobbies included drinking beer — the existence of which, he liked to say, implied that there must be a God — skydiving, cliff-jumping, and thrill seeking generally.

He’d bounced around college for a while, but books were not his scene. In his own words, “I cheated on everything, and I never cracked a book.”

At least, that was Jason before the attack.

The Attack: When A Bar Fight Is A Blessing

The attack happened on Friday the 13th — a superstitious day, to be sure. If Jason had stayed in, he wouldn’t have ended up in the hospital.

My grandmother likes to say that the one week when she doesn’t play the lotto will be the one week that her numbers are called.

For Jason, if he’d stayed in and avoided the hospital, he would have missed out on the equivalent of a winning lottery ticket.

It happened at a karaoke bar near his home.

Two men attacked him from behind, punching him in the back of the head. The blows knocked him to the ground.

They then kicked him until he handed over his prized leather jacket. Worth maybe, if we’re being generous, 40 bucks on eBay.

An exchange more than worth it for Jason.

He ended up in the hospital, with a concussion and bruised kidney, but they released him that same night.

When he awoke the next morning, everything was different.

Jock Today, Savant Tomorrow

jason-padgett-art

An example of Padgett’s fractal art.

Today, Jason is one of 40 known cases of acquired savant syndrome. He sees mathematics. He can draw complicated geometric fractals by hand.

When the sun glints, he sees the arc.

Before, he worked at a furniture store.

Now, he’s an aspiring number theorist and an artist.

He draws what he can see and then sells it. He’s even written a book about the experience, Struck By Genius, with an upcoming adaptation for the silver screen.

All because someone punched him in the back of the head.

math-trouble-try-head-trauma

That’s what I want to be. The convincing fist that transforms you into a number theorist.

Except, no, maybe that’s not right.

…I know.

I want to be the friendly surgeon that communicates with you via email. I teach you how to remove a spleen, and then you, kitchen knife in hand, do it yourself.

Yeah. That’s who I want to be. Email-spleen-remover guy.

The Toughest Part of Behavior Change: Remembering to Change

For Jason, radical behavior change was the result of someone striking him in the back of the head.

For you and me, that sort of change is decidedly more painful than a concussion, as anyone who’s attempted to lose weight can tell you.

Let me know if this scenario sounds familiar.

You want to change something about yourself.

Maybe you want to be friendlier.

Let’s say you’ve read about operant conditioning and positive reinforcement and you think, hey, this just makes sense — I should treat the people around me better.

So this becomes a goal: treat your colleagues better.

And, to do this, your plan is not more cowbell, but more compliments. Criticism sucks. No one likes receiving it.

Solution: more positive feedback.

So you set this goal.

And then you forget about it.

You go to work, critique people like usual, come home, and then realize: I was going to make a change.

But I didn’t even think about it when the opportunity was present.

I just kept acting out of habit, on autopilot, going through the same motions. Like Sisyphus, doomed to repeat my sentence for eternity.

All intended behavior change suffers from this flaw: forgetting to execute the new behavior when its applicable.

Maybe you want to start taking the stairs more, but every night you’re so tired when you check into your apartment that you opt for the elevator.

Or you want to wake up earlier, but every morning you silence your alarm.

What can be done? Is it hopeless?

No.

If-Then Rules Are A Real Life Cheat Code

…what if I told you that life has cheat codes?

That there are certain techniques you can use to make it more likely that you’ll achieve anything you want? Fully-general goal techniques that will increase your probability of success?

Sounds pretty good, right?

These exist.

They’re buried in textbooks, in scientific papers, across a dozen disciplines. Psychology, cognitive science, operations research, game theory, economics, and more.

Today’s email is about one of those cheat codes.

A way to solidify and increase the odds of permanent behavior change.

A tool to move you from who you are now, to who you want to be.

Today’s email is about if-then rules.

If-Then Rules Prevent Breast Cancer

Comic by Vicki Jacoby.

Comic by Vicki Jacoby.

Let me tell you a story. About boobs.

Orbell, Hodgkins, & Sheeran, 1997 rounded up a bunch of women, who all shared the same goal.

They wanted to perform a breast self-examination, or BSE, sometime during the next month. You know what I’m talking about: where women feel for lumps in order to detect breast cancer.

The authors of the study split participants into two groups.

The first group recited an “implementation intention”, which is just newly invented jargon for “if-then rule.” These are of the form, “If [situation], then [behavior].”

For instance, a participant in the study might form an intention like, “If I’ve just finished washing my hair in the shower, I will perform a breast self-exam.”

Or maybe, “If it’s the first Wednesday of the month, I will perform a breast self-exam while changing into comfortable clothes after work.”

The second group didn’t create any if-then rules — they just had the goal of performing a breast self-exam.

The result?

100% of the if-then group successfully performed a breast self-exam, while only 53% of the second group did so.

With one simple if-then rule recited in probably less than 60-seconds, participants doubled their odds of goal success.

If-Then Rules Are Very Effective, Even Across Different Circumstances

The effectiveness of if-then rules for behavior change has since been confirmed many times, in many circumstances. They’ve been used to:

  • Increase the likelihood of implementing a vigorous exercise program (29% -> 91%.) In contrast, an entire motivational intervention that focused on the danger of coronary heart disease raised compliance merely 10%, from 29% to 39%.
  • Hasten activity resumption after joint replacement.
  • In one study, forming if-then rules for eating healthy foods reliably increased the rate at which people did so.
  • In another instance, drug addicts undergoing withdrawal were given the task of creating a brief resume before 5pm that evening. Of those who didn’t form implementation intentions, none were successful. Of those who did, 80% were successful.
  • This effect has even been observed in those with damage to the prefrontal cortex — the front part of the brain, sometimes called the seat of reason. Forming the implementation intention to work quickly when given a certain stimulus — in this case, the number 3 while completing a computer task — increased the speed at which participants did so.
  • Here’s my favorite example: implementation intentions can make you less sexist. In one study, participants formed the if-then rule, “If I see a woman, I will ignore her gender!” The results? No automatic activation of stereotypical beliefs.
  • This has since been replicated both for the old (“Whenever I see an old person, I tell myself: Don’t stereotype!”) and the poor (“Whenever I see a homeless person, I ignore that he is homeless.”)

At least 94 similar studies have been conducted, and since integrated into a meta-analysis (n=8461). The analysis found that implementing this extremely simple technique had an effect size of d=.65.

What does that mean?

Let’s say that, when it comes to achieving goals, you have exactly average performance — 50% of people do worse than you, and 50% do better. (This is just an example. Given that you’ve read this far, you’re almost certainly above average.)

Given an effect size of .65 for implementation intentions, this would mean that — by implementing relevant if-then rules — you’d improve your goal-achieving-ability by .65 standard deviations.

Which is enough to outperform 20% more people. Just by adding these if-then rules, an average goal achiever would end up outperforming 70% of the population.

Oh, and here’s a neat tip: if-then rules can themselves be supercharged. Stellar (1992) enhanced goal achievement by having participants form an implementation intention, and then adding “I strongly intend to follow the specified plan!”

You should use if-then rules – Here’s how

I’m excited about this technique.

It costs nothing to implement, and it will very probably have a substantial impact on your life — if you bother trying it out.

Here’s how: Come up with some if-then rules, either write them down or say them aloud, and voila!, suddenly you’re more likely to achieve whatever it is that you want.

Plus, you can apply this to anything. It’s a fully general technique.

So why wouldn’t you?

The general template is straightforward: If [situation], then [behavior]. The idea is to pair a concrete scenario with a behavior you want to enact.

Here are some examples:

  • If I’m mindlessly browsing the web, refreshing Reddit, I will instead pick up and read a book.
  • When I go out to eat with friends, I will order a salad.
  • If I have just finished dinner, I will write 500 words.
  • If I’m writing and interrupted, I will ignore it.
  • If I add something to my Amazon cart, I will wait 24 hours before purchasing it.
  • When I get my paycheck, I will set aside 10% as savings.

And my personal favorite: if I’m attacked at a bar, I will become a number theorist.

P.S. You’ve read this far – want more? Get articles like this emailed directly to your inbox, just fill out the form below. Thanks!


 

Sources

  1. Orbell, Sheina, Sarah Hodgkins, and Paschal Sheeran. “Implementation intentions and the theory of planned behavior.” Personality and Social Psychology Bulletin 23.9 (1997): 945-954.

  2. Gollwitzer, Peter M., and Paschal Sheeran. “Implementation intentions and goal achievement: A meta‐analysis of effects and processes.” Advances in experimental social psychology 38 (2006): 69-119.

  3. Gollwitzer, Peter M. “Implementation intentions: strong effects of simple plans.” American Psychologist 54.7 (1999): 493.

  4. Steller, Birgit. Vorsätze und die Wahrnehmung günstiger Gelegenheiten. [Implementation intentions and the detection of good opportunities to act]. tuduv-Verlag-Ges., 1992.

Web Roundup: Links for September

Analogical Thinking: Concepts as Example Bundles

Analogy is our best guide in all philosophical investigations; and all discoveries, which were not made by mere accident, have been made by the help of it.
—Joseph Priestley

Words are not the stuff of thought.

This is straightforward to demonstrate. Present someone with a quote — it can be anything, but for concreteness let’s say you go with a bit of Thoreau: “I was not designed to be forced. I will breathe after my own fashion. Let us see who is the strongest.”

So, you present this line to someone, and then you let some time pass, say an hour. Then, ask them to repeat the quote back to you. What do they tell you?

I’d wager that you don’t get the exact quote back, but the gist of the thing. Sort of like when reading this, you will come away not with an exact memory of each word and every comma, but instead a general idea of what it is that I’m talking about — a summary. Almost as if your mind were a lossy compression algorithm.

If words were the stuff of thought, or at least of memory, you’d expect the mind to store words as, well, words. If words were the stuff of thought, when presented with a quote, on recall you’d repeat the exact quote back.

But, instead, there seems to be some kind of mental translation that goes on. You don’t remember the exact quote but, instead, it gets stored as a “gist,” as if your mind translated it to meaningness.

So, words are not the stuff of thought.

Let me put it another way. What I’m saying is that, when you are offered some concept in words, you store that concept in meaning-nese. And, then, when you communicate it with someone, you translate that meaning-nese back into words.

This explains why the quotes are not exact, but become garbled — the words have to undergo translation: first, from words to meaning-nese to be stored, and then from meaning-nese back into words during recall. It’s like taking English, translating it into Chinese, and then translating it back into English.

You won’t end up with the original English.

How this relates to metaphor

Analogy is anything but a bitty blip — rather, it’s the very blue that fills the whole sky of cognition — analogy is everything, or very nearly so, in my view.
—Doug Hofstadter

Now, with this in mind, let’s consider the problem of communication. To make this easier, let’s restrict ourselves to idealized communication — comminucation where the goal really is communication. This is different from communication “in the wild”, where a lot of talking is not about substance, but about expressing friendliness or (perhaps unconsciously!) furthering one’s agenda.

So, idealized communication, where discussion really is about the transfer of ideas. Given this idea of meaningness translation, what can we say about this transfer?

Well, the goal of communication is for the speaker to translate some useful structure she has in her mind, encoded in meaning-nese, and to re-encode it in some other form — typically language, but it could also be art, or movement, whatever.

Then, the task of the listener, is to take this language-encoded structure and to decode it back into the original meaning-nese — or, at least, some dialect of meaning-nese compatible with the listener’s mind.

Thus, communication is really about the transfer of useful mind structures between speakers — but, since we can’t directly transfer from one brain to another via an uplink ala The Matrix, there’s an intermediate encoding and decoding step.

Visually:

analogical-thinking

What labels imply

Okay, let’s take a step back then and consider the implications. What does it mean when you encounter a word or a phrase that you don’t understand? What does that indicate?

If we take the encode-decode dance literally, it’s an indication that the speaker has some useful cognitive structure in her head, with which you’re unfamiliar. So, concretely, I recently learned the word “ostensibly” which means “as it seems on the surface, but perhaps not actually.”

I have found this a gratifying label to have in my head, now that I’ve gone through the effort of re-building the cognitive structure that it represents. I can say something like, “Big business is ostensibly pro-immigration reform because they care about the welfare of would-be immigrants.” And “ostensibly” here acts as a sort of wink that says, yeah, that’s one explanation, but maybe there’s something more to it. In this example, this something more would be that maybe business just cares about cheap labor.

So, what am I trying to say here? What’s the practical interpretation? When you come across some equation, word, phrase, or whatever, that strikes you as foreign, this signals that the person has some useful cognitive structure that you don’t.

What does this have to do with analogy

Now, in a section that is about analogical thinking, you are maybe wondering why I’ve taken you through this detour into communication and cognitive structures. The idea is that, in some sense, all language acts as a metaphor.

This notion has recently been making the rounds with the endorsement of Doug Hofstadter, of Gödel, Escher, Bach (very recommended) fame, but the idea is at least as old as Lakoff and Johnson’s Metaphors We Live By (and, no doubt, older still than that.)

Here is what I mean when I say that all communication is analogy. Consider again the encode-decode theory I just told you about: it’s about taking meaning-nese, mapping it into words, and then unmapping it back into meaning-nese.

What do you call a mapping between two different things? An analogy. So, in a sense, all communication is about constructing an analogy between cognitive structures and words, and then the task of the listeners is to decode that analogy into their own mental model.

Essentially, that’s what’s happening right now: I’m encoding my ideas here, as words, and you, the reader, are decoding them. And, if everything is going as planned, you’re building a cognitive structure in your head right now which is similar to the one that I have in mind.

This is what separates a good exposition from a bad one: with a good one, it’s easy to decode and build up the writer’s cognitive structures in your own mind. With bad exposition, you either end up with no structure or a damaged one, a misunderstanding.

Concepts as analogical bundles

In fact, we can go even a little further than this, and say, what is a concept, really? That is, what are these cognitive structures that I have in my mind?

As a concrete example, let’s consider the number three. What is the idea of three-ness?

Well, with the concept, if you wanted to transfer it to a young child, you’d give concrete examples. A group of three rocks, three bananas, and so on, except of course you wouldn’t say “three” — you would show them three rocks, three bananas, and you’d ask them, so, what do these things have in common?

With enough examples, they would catch on, or at least so I suspect. I’ve been unable to acquire the necessary funding to experiment on young children.

The idea, though, is that with any concept, when you start unbundling it, you find that it’s really just a bunch of examples with some common core — some hidden structure, that isn’t immediately obvious when you consider just one thing in isolation, but becomes apparent with the study of tangible examples.

That is, a concept is a bundle of examples. The process of abstraction, of obtaining a useful cognitive structure, is ultimately one of comparing and contrasting these examples, until have built up this structure in your mind.

Some evidence regarding analogical thinking

So, let’s recap for a moment:

  • Communication is the process of translating a cognitive structure into words, and then from words back into a cognitive structure.
  • This mapping and unmapping is an analogy: setting up an isomorphism between cognitive structures and words.
  • A concept is a bundle of concrete examples. Each example contains some common core, with is captured in the concept. Thus, every concept is itself an analogy.

So, really, here we have two different uses of analogy: a concept/cognitive
structure is an analogy, and we use a process of analogy to transfer them
between people.

If this is really true, if I’m not just spinning you a nice story, we ought to expect that the study of concrete examples is the best way to go about learning a new concept. Really, it’s probably the only way to build a new cognitive castle in your head.

Is there any evidence to support this view? Well, yes. There’s significant evidence suggesting that comparing and contrasting examples is a powerful technique when it comes to understanding something new.

Consider the inert knowledge problem. This is when you’re in a situation, and you have relevant, applicable knowledge, but you fail to apply that knowledge. So, concretely, say you’ve taken a basic calculus class, and you’re arguing with someone about population growth. You get in this heated disagreement. They say that our current growth is unsustainable, and we’re headed towards an inevitable collapse because there is not enough food to go around — a Malthusian catastrophe.

You take a contrary position, and point out that, as nations develop, birth rates fall, such that population growth is below the replacement rate in some developed nations, like Japan and Germany. At a certain tipping point of prosperity, population plateaus and then actually begins to fall.

If your calculus knowledge transferred, here you might realize that this is an argument about the shape of the derivative of population growth. And, if you so realized, you might both draw out curves of what you think it looks like, and then compare that to real-world data.

The inert knowledge problem would be 1) knowing calculus, 2) having this argument, and 3) not realizing that you’re actually arguing about derivatives.

Now, depending on the amount of learning you’ve done in the past, you may or may not have noticed that inert knowledge is the devil. Why learn something if you fail to apply it? What can be done about this?

Well, okay, learning something is about the acquisition of concepts, right? So calculus knowledge is about building up calculus structures in your head.

If, as I’ve argued, this is the case, we might expect that comparing and contrasting examples (and thusly promoting concept acquisition) would help us overcome the inert knowledge problem.

Is this the case?

Yes. There’s even some evidence that comparing and contrasting examples, “analogical encoding”, is potentially the only effective technique at dealing with this inert knowledge plague. One review put it this way: “The best-established way of promoting relational transfer is for the learner to compare analogous examples during learning (Catrambone & Holyoak, 1989; Gentner, Loewenstein, & Thompson, 2003; Gick & Holyoak, 1983; Reeves & Weisberg, 1994; Ross & Kennedy, 1990; Seifert et al., 1986, Experiments 1 and 2).”

The quoted study further finds that analogical encoding — comparing and contrasting examples — not only promotes future transfer, but actually works backwards, too.

What do I mean by this? I mean that, if you sit down and compare and contrast examples, you’re going to be much more effective at coming up with past, relevant experiences of the principle in question. You can use this to transform inert knowledge into animated knowledge. To piece together the once dead into a new Frankenstein’s monster.

To use our calculus example again, if you’re reading about the jerk (the rate of change in acceleration), and you compare and contrast real-world examples, you’re more likely to spontaneously realize that, when learning to drive, the jerk you felt when stopping too quickly was an example of, you know, the jerk in physics.

Benefits for the acquisition of expertise

So, at this point, I hope you’re convinced that comparing and contrasting examples is the way to go about acquiring a new concept — it’s how to absorb a bundle of concrete examples and distill them into a useful cognitive structure.

But that’s not all! This is not the only benefit. Consider what it means to be an expert at something. One of the most cited studies on expertise compared how graduate students in physics categorized physics problems, versus how novices did.

The finding? Physics experts were more likely to pick out the underlying physical principle, while novices tended to focus on irrelevant surface characteristics. Presumably, physics experts had built up a cognitive structure that they recognized in the problem. The novices, lacking this mental structure, were unable to spot it.

If the theory I have sketched here is correct, then we ought to expect that comparing and contrasting examples will accelerate the acquisition of concepts and therefore expertise. Analogical encoding allows one to swim out from shallow seas and into the depths — “comparison between two analogous examples acts to make their common relational structure more salient (Gentner & Medina, 1998; Gentner & Namy, 1999; Markman & Gentner, 1993).”

Practical implications

Okay, then, we’ve just breezed through the core ideas of analogical thinking. To sum it up:

  • Words are not the stuff of thought. Our minds translate words into something else (meaning-nese).
  • Communication is essentially about analogy: it’s about mapping a cognitive structure (“meaning-nese”) into words, and then the listener unpacks that back into a cognitive structure.
  • Thus, successful communication is about setting up understandable analogies.

Then, I covered the relationship between concepts and analogy:

  • A concept is a bundle of concrete examples that illustrate some core relationship between those examples. The concept of three-ness can be understood as the relation between concrete instances of three things (bananas, rocks, years).
  • Given that a concept is a bundle of examples, we should expect that the best way to acquire a useful cognitive structure is to compare and contrast examples (“analogical encoding”).
  • There is a significant body of evidence that suggests that this is the case: comparing and contrasting examples is a powerful way to acquire a concept.

I also touched on the inert knowledge problem, and how analogical encoding
allows us to overcome it:

  • The inert knowledge problem is when you have relevant knowledge but fail to take advantage of it. Example: failing to realize that an argument about population growth is an argument about the shape of a derivative.
  • The only consistently supported method of overcoming the inert knowledge problem, and promoting the application of a concept in new situations (“transfer”), is analogical encoding — by comparing and contrasting examples. “When subjects explicitly compared the analogs and then immediately attempted to solve the target problem in the context of a single experiment, transfer was obtained with significant frequency even without a hint that the analogs and target were related. (Holyoak and Catrambone)”

Finally, I mentioned how this relates to expertise:

  • Experts are distinguished by better developed cognitive structures. Physics experts, for example, are able to pick up on the underlying structure of physics problem, while novices focus on surface characteristics.
  • How can we acquire such a cognitive structure? By analogical encoding — comparing and contrasting examples. Contrasting examples fosters a focus on deeper structures.
  • Thus, to accelerate the acquisition of expertise, one should take advantage of analogical encoding.

So, practically speaking, how can you, as an individual put this into practice? This method, analogical encoding, is both simple and powerful. To acquire a new cognitive structure, gather together a bunch of examples of the concept, and then compare and contrast those examples.

If you would like to improve your calculus skill, you should Google for real-world examples of derivatives or integrals or any concept that you’d like to acquire. Then, write them down, and then list how each is similar and each is different.

You can also use these principles to improve your communication and teaching skills. If you want someone to obtain a cognitive structure that you have, illustrate the principle with examples, and then bring their attention to the underlying similarity connecting the examples. In the case of this section, the principle behind all of these examples has been that learning and communication is about the transfer of concepts, which are bundles of examples, and can be acquired by contrasting concrete examples.

Now, what was that Thoreau quote, again?

Further Reading

Book Review: A Random Walk Down Wall Street

a-random-walk-down-wall-street-review(Note: this review originally appeared on a sister-site I’m building out, Top Financial Advisor, but I’m cross-posting it for readers here, as part of my ongoing book reviews. The last post in this series was the Advertising Secrets of the Written Word review and summary.)

Ah, money. It doesn’t taste good. It doesn’t smell good. It can’t keep you warm at night, and it won’t love you back.

But you can trade it for something that does.

And the most remarkable thing that you can buy with money? More money. Like some sort of broken genie that allows you to wish for more wishes.

Guy at counter: Yeah, uh, I’d like to buy three dollars.
Cashier: Okay, sir, your total comes to two dollars.

Except there’s a catch, and that’s time — you can put in money and get more money out, but you’ll have to wait a while. Like growing a chia pet, instead of water, just add time.

Today’s book, A Random Walk Down Wall Street is about investing: how to find the best risk-reward tradeoff to turn your money into more money. How to buy three dollars with two.

What the book is about

The book is about random walk theory. The author defines a random walk this way: “A random walk is one in which future steps or directions cannot be predicted on the basis of past history.”

Here’s another way to think about it: imagine that you flip a coin 10,000 times. Starting from zero, with each heads, you add 1. For tails, subtract 1.

Then, plot this number against the number of flips.

Except this is 2014 and I definitely do not have the wherewithal to flip a coin 10,000 times, so I wrote a program to simulate it, and here’s what it produced:

random-walk

Remind you of anything?

It looks like a stock market chart, and it sure looks like there is a trend there — you should get in on this when it starts to go up, because there is some momentum. When it goes up, it keeps going up.

Or, at least, that’s the lie your mind constructs. At any point, the next point is decided at random, by a coin flip. There’s no tradeable information in this chart at any time, by construction.

The stock market, the author argues, works in the same way. Whenever you buy an individual stock, you’re betting that the coin will land on heads.

The implication, then, is that an investor ought to buy index funds, because they allow to an investor to gain broad diversification for very cheap. (An index fund is like buying a small slice of each stock.) This diversification increases returns and decreases risk — a point which I plan on addressing in the future, because it’s sorta neat.

In theory, one could gain that diversification by constructing a portfolio from scratch — out of individual stocks, bonds, etc but, in practice, you’ll end up paying a huge premium in fees. This premium compounds over time (less money is initially invested) and can add up to staggering amounts in the long run.

Like I calculated before, a 1% increase in portfolio returns (by avoiding unnecessary costs) could be worth a quarter or a million dollars or more.

The book also has a history of speculation, discusses the correlation between risk and reward, the benefits of diversification, and how you ought to invest at different ages and under varying circumstances. Plus some example portfolios.

My opinion of the book

Price is what you pay; value is what you get. —Warren Buffet

First, I’ll tell you what I didn’t like. Then, I’ll tell you what I did.

Negatives

So, the most annoying bit of the book is the lack of technical details. I’ve seen some reviews that have described the book as either 1) too technical or 2) having enough technical meat to satisfy engineers.

Nope. Graphs were seen but, in general, little technical explanation beyond the standard economic just-so stories. (If anyone has ever told you that raising minimum wage is bad “because supply and demand,” you’ve encountered an economic just-so story. In reality, economists are split on the issue.)

Further, the book uses what is the most annoying rhetorical trick of all time. It goes like this. The author has a theory. They say something like, “There is a moon-sized pile of evidence that supports my theory.”

And then they cite none of it.

Here is a real example: Billionaire Seth Klarman has written a paper, in which he argues that markets are like so inefficient, duh, and that “armchair academics … cling to their theories even in the face of strong evidence that they are wrong. ”

Annnnnd, the paper continues and no strong evidence is seen. WHERE IS THE EVIDENCE, KLARMAN? SHOW ME THIS STRONG EVIDENCE.

To prove that the moon exists, just point.

This is probably not a big deal to most readers but, as disgruntled blogger planning on digging deeper into the available literature, it was pretty fucking annoying.

Beyond this, I would describe the prose as good for an economist but nothing that impressive. An unmotivated reader may have trouble getting through it.

The humor is also pretty weak.

Positives

Okay, with that unpleasantness out of the way, on the whole, I thought the book was very impressive. Indeed, I was most taken with the just how reasonable the author’s opinions and statements were.

I’d expected an ideological barrage about market efficiency, but instead I found a very measured message — along the lines of, “Markets are weakly efficient, such that it’s unlikely that an individual investor can beat the market. But I understand the urge, and if you want to pick individual stocks, here are some guidelines.”

The book doesn’t even argue for the strong or semi-strong versions of the efficient markets hypothesis (EMH), instead conceding that it’s not a perfect random walk, and that there is some momentum — just not enough that someone can trade on it and still beat the market after taking into account fees, and taxes, and all the things that make people say, “Life forever? I don’t want to live forever.”

All the weak EMH requires is that “market participants not be able to systematically profit from market ‘inefficiencies’.” This doesn’t seem absurd to me, but I’m not yet convinced of. There certainly seems to be at least one person who’s returns are not explained by chance. (Spoilers: it’s Warren Buffet.)

And it seems a little galling that aggregating the bets of irrational market participants (ala behavioral finance) should result in rational prices, and don’t give me that law of large numbers “explanation.”

But I’m planning on surveying a lot more related evidence, so I haven’t come to any strong opinions either way yet.

Beyond that, the book is an absurd value (as are a lot of resources when it comes to money.) You can buy a copy for like 11 bucks off of Amazon and, by using the advice contained therein, realize probably an extra 1% in annual returns, which adds up to tens of thousands or even hundreds of thousands of dollars over a lifetime.

So it’s sorta like trading 11 dollars for 250,000 dollars in the future.

What I’m saying is: this book on investing is a good investment. You should buy a copy.