Oblivion Part 4: Learning from Stories

How do we remember? Stories. Since forever. Long before TV. Long before books. Humanity is hard-wired to LOVE stories, and pay attention to them.

In recent history, one story stands out. An epic narrative that gripped the west, the English speaking world in particular. Including parts of the world that have, incidentally, done a terrible job of handling the pandemic. Game of Thrones.

George R R Martin has sold around 100 million copies of his book series A Song of Ice and Fire. The television adaptation – Game of Thrones – drew up to 20 million viewers. That’s for each episode, when it was shown live. Total viewership would be in the billions. This narrative had reach, it had impact, it was celebrated: The TV show won more Emmy awards than any TV drama ever and regularly tops the list of best TV shows of all time. In the decade preceding the pandemic, it was the dominant piece of popular culture.

So what does this very long story have at its heart? A forgotten disaster.

Now, why did we need this again?

The fictional world of A Game of Thrones is centered on Westeros, a land with a big wall at its north. A wall – 200 metres high – separates the kingdom from badlands beyond. The story opens “beyond the wall,” where we discover a terrifying enemy is rising. An invasion force this society faced before, but to which it now pays scant heed.

Has the society of Westeros been investing in its defences? Oh no it has not. Once upon a time the wall boasted an enormous force, no longer. The wall has nineteen fortresses and towers but these days only three are staffed. Furthermore, the recruits into the force – known as the  Night’s Watch – are the dregs of society, supposedly criminals given the opportunity to join instead of being sentenced to death. 

This is the set-up. Thousands of pages of gripping narrative ensue, dozens of hours of extremely expensive premium television, lovingly shot on location. And the tension that illuminates the whole damn thing is that of a pantomime:

The frustration where the crowd yells “He’s behind you!!” and the actor looks over the wrong shoulder? Not seeing the threat that is totally obvious? This iswhat powers the book series A Song of Ice and Fire and the TV series A Game of Thrones.

The kingdom of Westeros lavishes attention on power plays and assassinations – and gives thousands of lives to internecine wars – while vigorously ignoring desperate warnings that an existential threat is building.

Palace intrigue. Oooh Shiny!

The watchers on the wall are out of sight and out of mind for the decision makers, who live at the opposite end of the kingdom. Few powerful people have ever visited the wall. When one does, it is a surprise. That happens right at the start of the story, and notably the powerful person who makes that visit, (Tyrion Lannister, brother of the Queen) becomes a hero of the book.

The Night’s Watch use the surprise visit to make a request for additional help. Which is ignored. Its inability to raise much in the way of manpower is a consistent theme of the story. Even the organisation itself seems to have experienced strategic drift. It is now focused on repelling attacks by humans who live on the far side of the wall. The folly of this is apparent to the reader, but eventually, deep in the narrative, in book forty-four or something, Martin also spells it out:

The Night’s Watch has forgotten its true purpose …. You don’t build a wall seven hundred feet high to keep savages in skins from stealing women.

Which is to say: there’s a bigger threat than the one we are focusing on. What’s interesting about the White Walkers – this invasion force that is building, is the parallels with disease. They share similarities with zombies and can easily be read as a metaphor for infection.

So Game of Thrones is about a society that ignores its own history and warnings. Of course, it is about our society too, our petty spats and pathetic attention spans that mean we forget what matters and focus on what excites us. We run down our defences until it is almost too late. We take the bearers of warnings, and laugh at them.  We let a pandemic run riot.

WINTER IS COMING

There is one clan in the book that warns of impending doom. The Starks. Their motto: Winter is Coming. They’re the main heroes of the book, and – I hope I won’t spoil the story too much here –  few Starks get to have an especially lovely time of it.

Stark, adj. providing no shelter or sustenance. “A stark landscape.”

Now, what’s clever about the fictional world author George RR Martin has created is that winter is unpredictable. It comes when it pleases, lasts for an unknown amount of time. Winters are frightening. Some are brief,  few are harsh. A pareto distribution. Then every so often – just like quakes and fires and floods, volcanoes and recessions – a really big one comes.

Thousands of years ago, there came a night that lasted a generation. Kings froze to death in their castles, same as the shepherds in their huts; and women smothered their babies rather than see them starve, and wept, and felt the tears freeze on their cheeks… In that darkness the White Walkers came for the first time. They swept through cities and kingdoms, riding their dead horses, hunting with their packs of pale spiders big as hounds.

This story is told by a character named Old Nan. She’s a fulltime childcarer. She has no status, meets with no powerful people. But this story – not told by anyone else – is one of the most important warnings in the entire narrative.

Her story – a kind of oral history if you like – has apparently been passed down for thousands of years. Of course, truth is stranger than fiction. If you write a book about a society that has forgotten its history, you must put in hundreds of generations between the last disaster and the present to help readers believe it is forgotten.

But of course the last huge global pandemic was in some people’s lifetime. In real life, we apparently discard memories and lessons of the last disaster rather sooner.

“If we forget where we’ve been, what we’ve done, we’re not men anymore. We’re just animals.” – Samwell Tarly, A Game of Thrones.

This is Part Four in the series on how we forget disasters. Part 1 is here, Part 2 is here, Part 3 is here.

Oblivion, Part 3

A bit over ten years ago, the city of Brisbane flooded. It was a major event. I watched a lot of news that week, and they played and replayed this amazing video. It captures one perspective on the floods, from a town just outside Brisbane.

The 2011 flood was the costliest flood in Queensland history – but not the biggest. A flood in 1974 had brought higher water levels. The incredible urban growth in the intervening years, however, meant 2011 was a bigger deal, affecting more people.

We learn a couple of surprising things about memory from this event.

First, the 1974 floods helped save Brisbane from even worse in 2011. One of the good things about the flood was the small amount of warning authorities were able to provide of imminent rising waters. (Albeit not enough to save the cars in the above video!)

Before the flood peaked, news media was able to warn local residents. An episode of current affairs program 7.30 aired before the waters peaked. Presenter Leigh Sales: ‘Even with the emergency response in full-swing, some experts in disaster management believe it’s not too late to learn lessons from the devastating floods of 1974’. The segment interviewed a survivor of 1974, and others.

I thought whether or not an event is publicly and widely remembered would be set in stone at the time of the next disaster. But that is not the case. So long as records exist somewhere, so long as memories are held by private citizens, they can be flushed out and made into public memories Another example: the ABC in Brisbane got people to send in photos of flood markers and flood memorials from the 1974 event – many of which were unobtrusive, mousy little things you’d easily miss – and collated them on a digital map in Brisbane.

One of the tenets of disaster memory is that memory of old events is re-activated by new events. You can see this in the very blog you’re reading – the obvious reason I’ve become focused on memories of Spanish Flu is the current pandemic!

This Google Trends data shows the same thing – Spanish Flu emerged from obscurity to become suddenly a scorching hot topic in 2020.

The historian whose work I’ve relied on for understanding the Brisbane Floods is Scott McKinnon. His paper “Remembering and forgetting 1974: the 2011 Brisbane floods and memories of an earlier disaster” is brilliant. Here’s a great quote from it:

“Sally and her partner, Jane, for example, lived in the ground floor flat of a two-storey and two-home dwelling. Their actions in the flood were largely determined by the memories of a neighbour.

“A lady across the road, Margaret, was in the ‘74 flood and she came over and said, “If it’s going to be worse than ’74, you girls have to get out, or else be up top and get everything you can up”.”

Sally and Jane were shocked into action, and despite being trapped, survived.

Eagle Street Brisbane, 2011. Photo: Andrew Kesper.
Licensed under the Creative Commons Attribution 2.0 Generic license.

Memory matters. It helps determine how we respond to the next disaster. We can reactivate memories. This is why it’s so important to understand how we forgot the Spanish Flu. But as McKinnon points out, our memories are not always helpful.

HISTORY IS WRITTEN BY THE VICTORS

You’ve probably heard the expression. This – it turns out – is true not only of wars but, in a strange way, of disasters too. History is written by survivors. In Brisbane, the memory of the floods is of triumph over adversity.

“I want us to remember who we are. We are Queenslanders. We’re the people that they breed tough, north of the border. We’re the ones that they knock down, and we get up again.” Queensland Premier Anna Bligh.

McKinnon’s whole bit is digging out the memories that are excluded by this way of looking at history. The marginalised communities. The people who died. The ones who got PTSD.

This really speaks to me because I am fascinated and appalled by war stories that involve a narrator who survives against terrible odds. I have been since I read about Roald Dahl’s ludicrous run of good luck that led him to survive World War 2 and go on to be an author.

His story is survivorship bias at its most obvious, but it is there in every war story. Actually, all the stories we hear are survivor stories. People who die in wars, people who die in disasters, they don’t get to tell a story. Their story can be told by someone else, but we never hear their perspective

“It was horrible, but somehow we survived,” people say. Somehow the city survived, somehow the country survived. The thing that survived is abstract – but lots of very real things didn’t survive at all. The “somehow we pulled through” narrative emphasises what endured.

This statue in Lisbon honours King Joseph I’s response to the Great Earthquake of 1755, which opened up 5-metre wide cracks in the earth and killed 30,000-40,000 people.

McKinnon cites renowned memory researcher Astrid Erll: “Things are remembered which correspond to the self-image and the interests of the group’. This is the second major lesson of the Brisbane Floods.

We make public memories that make us feel comfortable and reassured, ones that don’t make waves.

I never imagined this when I dived into learning about disaster memory. It’s not just time that kills memories, such that they die off slowly over time, it’s not just convenient narratives either. It’s power. Oh shit.

“What should we remember about ourselves?” is arguably the question that sparks the culture wars. Once you start thinking about this, it is strange how memory is at the forefront of culture war topics. It could be pulling down statues, or re-naming parks. It could be a Prime Minister objecting to a “black armband view of history”. It could be a major journalistic effort like the 1619 project, which aimed to give new perspective on the history of the USA.

In a way I’m horrified by this – I wanted to write about volcanoes, not the bloody culture wars! But the more I look at it the more I can’t deny our identity is formed by remembering certain bits of the past and forgetting others. Which is affected by who has power. It’s not the only factor but you can’t address collective memory without thinking about it.

When we make collective memories about disasters we need to be aware of the fact that they are also affected by these powerful forces. Even in the context of something seemingly apolitical, like a flood, this happens. The ten-year memorial video made by the ABC, for example, focuses on the rescuers – the heroes – and concludes with a rescue technician talking about a letter he got from someone he rescued. “That’s probably one of the things I cherish as a memory of that day,” he says.

It’s a nice note to end a video on. But is the rescuer the most important thing to remember about the floods? Is it the sort of memory that will make us change? Or is it just a memory that makes us feel safe and comfortable? As McKinnon puts it, one of the way we create memories of disasters is as “successfully negotiated moments securely located in the past.”

It’s over, it’s finished, we handled it, we don’t need to worry about it.

Such memories discourage people from rocking the boat. Which is exactly the way of thinking that meant we weren’t ready for Covid-19.

This is part 3 of the series. Part 1 is here and Part 2 is here.

Oblivion. Part 2.

“We believe that if an event is historically significant – if it affects many, many people, if it changes the fate of countries in the world, if many people die from it, it will inevitably be remembered. That’s not at all how it works.

-Professor Guy Beiner, Historian

We go through earth-shattering disasters. Ones we can learn from. Afterwards, we forget the disasters and throw away the lessons. When the disaster happens again, we are flabbergasted. We throw our hands in the air. The word unprecedented issues incessantly from our stupid mouths. Millions of people die.

We need to learn from the pandemic. But the lesson of the pandemic is not to prepare for pandemics. I mean, that has to be part of it. We should harden our defences against rogue strands of RNA. Staff the labs. Stock up on swabs. But if all we learn is that, the most obvious point, we’re missing the big upside.

The opportunity here is to learn the pattern. The next major crisis probably won’t be a pandemic. It will be something else we’ve gone through before, swore we would never endure again and are busily forgetting.

An earthquake? A volcano? Floods? A financial crisis? A computer virus? Terrorism? Rising fascism? A big war?

Flood marker, Albury NSW

The incidence of these events comes in a Pareto distribution, as discussed in Part 1. Occasionally severe versions clump together and scare us senseless. Occasionally they disappear, lulling us into a state of complacency. We encounter a lot of the mild versions of each class of disaster – low floods, gentle earthquakes – and begin to see them as regular benign background events. But in a Pareto distribution a majority of the impact comes from a tiny fraction of the instances. Yes, the last computer virus hit a few hospitals who recovered quickly. The next will be small too. The one after that though? It could be the big one.

Disaster memory is a thrilling field to be learning about. I started thinking about how we remember disasters a couple of months ago. Before long, I found I couldn’t stop thinking about it, and began looking for information. Often that’s a dead end. But in this case, boom. Loads of research! And it’s fresh. This is a major area of interest right now. The researchers are young, dynamic and they are active.

THE HOWLING WIND

I jumped on Skype last week with a guy from Cambridge called Dr Rory Walshe. He has done a ton of really amazing field work on cyclones in Mauritius. That’s right, his latest research required him to quit rainy England for a tropical island, so you know he’s a smart guy.

Walshe’s paper on that research was published in the International Journal of Disaster Risk Reduction in 2020. Cyclones are a particularly important type of disaster to remember accurately. Because the eye of a cyclone is a trap. If you forget that a cyclone has a lull then returns with a vengeance, you can be a long way from safety when the wind returns.

Walshe’s research involved over 130 community interviews with citizens on what they remember about cyclones. It revealed, in some pockets, dangerous beliefs about the cyclone eye.

“If the rain stops and the wind goes away, it is safe to go outside, it never comes back,” said one respondent.

You might think old timers would know about the eye of the storm and kids would be ignorant.

But Walshe finds the picture is more complex:

“The results demonstrate that the dynamics of forgetting are not as simple as a steady demographic churn over time as eyewitnesses pass away. Cyclones (and other events) are not forgotten in a gradual, uniform or passive process over time, contrary to the statement; “the forgetting curve is logarithmic, the more time that has passed since an event, the weaker are the memories about it” (Fanta et al., 2019). Mauritius demonstrates several exceptions to this statement and those like it, which suggests that the creation and loss of memory is a complex process.”

It isn’t just time that kills memories. They don’t die of old age. We kill them. And the weapon of choice is narratives we create to explain the world as we experience it.

Throughout the history of Mauritius there were periods when we were cyclone free, and people attributed that to the island being deforested, [they said] cyclones will not come anymore.” – Mauritius expert interviewee, reported by Walshe.

Nothing could be more natural than for people to create narratives to explain their perceptions. Long quiet periods get explanations – perfect, simple and wrong – and those explanations, when the next disaster comes, are fatal. In Mauritius it has now been quite a long time between cyclones, and dangerous beliefs are rising.

“We have noticed climate change here; summer is very hot, and winter is very cold. that’s due to climate change, and its why we will not have the same kind of cyclones like we used to have,” – Mauritius community interviewee, reported by Walshe.

Hearing about how Mauritius explains away cyclones, I can’t help thinking about The Great Moderation. This once-popular theory on why recessions were so rare these days reached peak popularity in the 2000s …. just prior to the Global Financial Crisis. Among the anguished howls of the millions cast into enduring unemployment, if you listened closely, you could hear the embarrassed murmuring of the macroeconomists.

Lucas, you sweet summer child. This was published in 2003.

The belief recession risk had been moderated might even have been a contributing factor in regulators permitting all those crazy home loans. Speaking about dangerously glib explanations, we should also cast a side-eye at the Golden Arches Theory of Global Conflict, the very appealing claim that two countries with a McDonald’s have never gone to war. The implication is economic linkages reduce the risk of major global conflict. (Of course China and America seem to be fighting because of trade as much as anything.)

A medium Sprite and a side of global peace, thanks.

PINING FOR THE CALDERAS

When I spoke to Walshe, he felt a bit cloistered by the pandemic. Supposed to be in South America right now learning how societies respond to the threat of volcanic eruptions he is instead trapped in a flat somewhere in the UK. About six times during our conversation he expressed his desire to be in Patagonia instead of at home!

Rory was a delight to speak to, well-informed, insightful, generous with his time. He apologised afterwards for being “off his game” having had the AstraZeneca vaccine the day before our chat and suffering through a sleepless feverish night. I hadn’t noticed he was off his game, but the fact of his vaccination brought to the forefront the reason for my inquiries: the pandemic.

We began to forget the Spanish Flu almost as soon as it had ended. What other events are out there, ignored by history, waiting to come back and bite us?

This is Part 2 of the Series. Part 1 is here.

Part 3 coming soon, with some excellent new discoveries!

Oblivion: How Society Forgets

I’m cross. All around me I see people learning the wrong lessons. If we waste 2020, if we fail to draw the correct lessons from it, that will be a worse disaster than the pandemic itself.

The world was ill-prepared for the pandemic. Terribly ill-prepared. Cast your mind back to March or April 2020. The shortages, the confusion, the awful and irreversible policy failures – they were not evenly distributed across the world.

Early success in battling the virus was seen in some countries. Taiwan did well. Mongolia had almost no coronavirus for about a year. China cracked down hard and has kept SARS-nCov-2019 from circulating for most of the past 12 months. Australia, despite some big blunders, did well too.

The countries that did better are mostly in Asia. Recent experience with SARS made these countries far more pandemic-aware and left them far better placed to fight the virus. They had not forgotten the risk of plague. How did they remember? Not because of something that makes their societies more cohesive. Simply because of recent experience. Little time had passed since they last faced a deadly contagious disease.

RECENCY

The importance of recent disaster experience is plain for me. I remember Black Saturday vividly. Black Saturday was a day of death. On 7 February 2009 the temperature reached forty-six-degrees (115oF) in Melbourne, Australia, the city where I live. By nightfall that day 173 people had burned to death in a series of enormous, linked infernos that turned the land into a hell where fleeing the fires was likely to leave you dead in your car, and staying still would leave you in the merciless path of enormous flames

Haze choked the sky. I remember checking the Bureau of Meteorology’s rain radar that day and looking at the strange patterns the radar identified as heavy rain. These were not rain, but smoke. Enough particles of plant, of animal and of person were lifted into the sky by the blazes as to leave a huge radar signature. Those fires were enormous and they made a tremendous mark in our memories.

Eleven years later, in the summer of 2019-20, intense bush fires raged again in Australia. This time instead of one very bad day, they lasted for over a month. The fires burned 40 times as much land as the Black Saturday fires. By almost every count, the fires were worse – every day was a state of emergency. The smoke cloud travelled around the world. And yet the fatality count was far lower, at 34 deaths. The living memory of Black Saturday is a huge reason why. We all knew how many people had died in Black Saturday, and we knew how they had died – by not evacuating early enough. The fresh collective memory of tragedy prevented the recurrence from being even worse.

UN-PRECEDENTED

Throughout the pandemic I have become absolutely fed up with this word: “unprecedented”. You hear it everywhere, usually on the lips of people who ought to know much better, people whose copy of the OED will tell them what that word means. The world has experienced pandemic before. Often. Ebola raged in West Africa within the last few years. SARS hit China in 2003. MERS was a small but even more recent zoonotic respiratory virus, hitting in 2012 with a fatality rate of one in three.

In 2003, on a train, at the Mongolian-Chinese border. They didn’t swab me, so far as I recall, but they did read my temperature.

The big reason we should have been ready for a big pandemic is not those serious yet contained outbreaks confined to a handful of countries. It is the fact that just 103 years ago – practically within living memory – the world experienced the Spanish Flu. The 1918 pandemic killed 50 million people. FIFTY MILLION! In a global population that was then much smaller, perhaps 25 per cent of what it is now. What’s more, that flu virus was “atypically fatal to those aged 20–40 years.”

How is it that the memory of this enormous tragedy is not carried forth, memorialised publicly, and even more importantly, embodied in extremely good pandemic preparation practice?

Compared to Spanish Flu, we’ve gotten off lightly for our ill-preparedness. Covid-19 has killed almost 3 million so far, and has mostly spared the young from death. We could have had it much worse, and the reason for a better result this time is, emphatically, not our careful tending to the lessons of history.

DOOMED TO REPEAT IT

The Spanish Flu was not part of our mainstream discourse on risk. They called it “The Forgotten Pandemic.” In 1924, Encyclopedia Brittanica published an enormous compendium on the preceding quarter century of history, titled “These Eventful Years: The Twentieth Century in the Making, as Told by Many of Its Makers; Being the Dramatic Story of All that Has Happened Throughout the World During the Most Momentous Period in All History.” I sounds like a good read, containing a chapter by Marie Curie on radium and a chapter by Sigmund Freud on pscyhoanalysis. However, it mentions Spanish Flu not even once. A search for the term “pandemic” in its pages reveals no mentions.

But why? Spanish Flu was not so long ago for its history to be written on shards of papyrus that crumble when we touch them. Colour photography had been invented. The New York Times was operating then. The Times of London too. There are people wearing masks in nursing homes right now who were alive during the last big pandemic. We say Lest We Forget when it comes to the big war that ended in 1918, but when it comes to memories of the pandemic – which killed more people than the war, mind you – it’s more a case of … forget what? It languished in the shadow of World War One and was forgotten even as soon as it began.

That forgetting meant the chance of us being ready for coronavirus was slight. And then a century passed.

By 2019, as coronavirus began to mutate, and spread from a rogue pangolin to the first humans, the west was standing down its viral defences. in 2018 The Trump administration cut the programs designed to defend the United States of America from a virus, and its top experts quit.

What limited pandemic war-gaming that did take place in the United States revealed the country to be woefully ill-prepared. America was hardly alone, it is simply held up as an example of a country that *should* have had the resources to defend against the threat. Bill Gates tried to warn them, after all, as this 2015 video shows.

The UK tried to do better and still failed. Horribly.

Now, vaccine technology is helping some countries make up for their monstrous early errors. The efforts of the scientists are heroic and should be applauded. But they are not reason to ignore the lesson, which is this:

We forget.

We really ought not to. We ought to know some disasters come around only rarely. But when time passes, and for certain other reasons, we let some events fade into oblivion.

Letting disaster memory erode like the half-life of some isotope is not good enough if we want to protect society. But some events recur in a way that makes us blasé. Earthquakes, viral outbreaks, volcanoes, tsunamis, recessions, terrorist attacks, even wars. All have apocalyptic versions that come rarely and irregularly, plus mild regular versions that wear down our will to maintain vigilance. This is the perfect recipe for society to forget.

THE BIG ONE

They say 80 per cent of the insights come from 20 per cent of the philosophers. 19th century Italian mathematician Vilfredo Pareto is found firmly in the small but important group on whom we depend.

Pareto lends his name to several key ideas in maths and the social sciences, but what is most important for our purposes is the pareto distribution. Pareto distributions are the ones that surprise us. They differ from normal distributions, or bell curves. In a pareto distribution, the tail of the distribution is responsible for the extreme majority of its impact.

For example, a tiny minority of the earthquakes in any time period account for the large part of the seismic energy released, as the next graph depicts. Earthquakes over 6.5 in scale are in yellow, those over 5.3 in green.

LDEO observatory, Columbia University.

Similarly, the average pop band gets most of its Spotify spins from a minority of its songs, the average company makes most of its money from a handful of its products, 90 per cent of the salary cap for your favourite sports team goes to a minority of players, Most of the people in Australia live in a handful of cities, etc.

The pareto distribution is everywhere – even in disasters. A minority of the cyclones do most of the damage, a few tsunamis are much worse than the rest put together, the largest terrorist attack in history has a death count several fold higher than the second largest, etc.

This matters, because when pareto distributions happen over time, the interval between serious events will be random, and potentially large. Look back at that earthquake graph above. Until the magnitude 9.1 Indian Ocean quake in 2004, there was no sign of a quake of anything like that size in the preceding 30 years.

That means two things:

IN the aftermath of a rare and major disaster, we will usually castigate ourselves for not understanding it was possible, zero in on only the disaster that just happened, and prepare, quite specifically, for it to happen again. Even though it is no more likely to happen again.

Later, when a great deal of time has passed, we will conclude that we overreacted. We will dismantle the institutions we built, reduce our defences, make savings, forget what really happened, and become overexposed. That is when the severe risk emerges. (However the simple passage of time is not the only cause of forgetting. More on that in a future post).

Big White Swans

Nassim Nicholas Taleb coined the term Black Swans to describe unforeseen events that do great damage. The idea behind the coinage is that nobody had seen a Black Swan before, only white swans, and nobody ever expected black swans were even possible.

It’s not his fault the idea went viral. It’s our fault for believing it, for not seeing it as the ego-massage that it is. We are exceedingly complimentary to ourselves by imagining only black swans can screw us up, that only the unforeseen can assails us. This is conceit, it is arrogance, and it is part of the problem.

The more I learn about disasters and forgetting, the more I come to realise society suffers regular and devastating attacks by plain white swans. “HOLY HELL WHERE DID THAT THING COME FROM?” we ask as the swan’s pointy beak tears at our flesh.

How can we be expected to prepare for that which we’ve never seen before, when we can’t even properly prepare for what we have seen time and again?

More to come in PART 2 soon.

I wrote a book! Incentivology.

I started this blog 10 years ago, in what was probably the best decision in my professional life. I left my public service job and began what became a whole new career.

Now, with a decade of writing about economics behind me, at the Financial Review and as a freelancer, I’m happy to say that I have had a book published!

Writing it has been a heck of a process.

It started out like this, just a bunch of ideas on the wall.

IMAG1431

And after a lot of hard grind, today it looks like this:

IMAG2871 (1)

There were speed-bumps of many kinds. Including a terrifying moment when I tipped water all over my computer a few weeks before the book was due.

Rice didn’t rescue the machine. So I put it in the oven. That seemed to help a little bit and I was able to turn the computer back on.

The big mistake I made was what I did next – blasting it with a hairdryer. I melted half the keyboard and  the “I” key came off completely. I struggled through the end of the book with a warped and wobbly 25-letter alphabet under my fingers.

But it got done, and it got out, and now it is in bookshops, alongside a lot of very serious authors!

hll of content

Extracts of the book have been published in the Sydney Morning Herald, Crikey, the Australian Financial Review, The New Daily and at news.com.au. (They’re all different, we’ve practically given away the whole book for free!)

An enormous highlight of the post-publication period so far has been doing a few media interviews about the book. I got to chat on air with Australian media legend Myf Warhurst!

with myf

It’s extremely exciting to have it out there. You can get a copy in most bookshops, or online, through this link: smarturl.it/Incentivology .

Early readers are enthralled!

IMAG2856(3)

Privilege, influence and Outliers

I just re-read Malcom Gladwell’s book Outliers – picking it up again with the goal of cribbing from it what is necessary to write a best-selling piece of pop non-fiction.

While I’m not yet clear on how useful it was in that sense, the book’s contents surprised me. What I vaguely remembered as a tome about the secrets to success is in fact anything but.

Sure, it contains the chapter on the “10,000 hour rule.” But the vast bulk of the book is framed around something far less like “self-help.”

Malcolmgladwell.jpg
Gladwell (source: Wikipedia)

The book is really about why people succeed because of circumstances they did not create. My favourite example, the simplest and most arbitrary in the book, is to do with why professional Canadian ice hockey players are disproportionately born in January and February.

Canada groups junior ice hockey players by year of birth, so kids born in January play mostly against kids younger than they are.  At that age, Gladwell explains, a few months makes a big difference. The older kids are naturally the biggest, strongest and most coordinated. They get chosen first, then rewarded for their superiority with more opportunities, more games, more coaching etc. The rest is path dependency.

I like this theory (and not only because as the youngest kid in my year at school I was particularly unsuccessful at sport). It makes an intuitive kind of sense that success is to do with luck as well as talent. For example, while some very dedicated short people have played professional basketball, the luck to be born tall is a big part of your ability to make it in the game. The book is stacked with examples like this.

TIMING?

So the Gladwell book is basically about privilege. It’s about how successful people are the product of a confluence of factors they don’t control. There’s even a fantastic chapter on Gladwell’s own Jamaican heritage and how perceived light-skin tone helped his forebears.

 

Privilege in general, but especially white privilege and male privilege, are some of the hottest and most contested topics these days, this book is pretty much completely about them, and yet it wasn’t swept up in the debate.

‘It’s weird’, I found myself thinking. If this book had come out now it’d be part of a fierce partisan culture war. Gladwell would be reviled in the pages of 4Chan. He’d be a cuck  and an SJW and a whipping boy.

But it came out a while ago and so it missed that.

How, I found myself wondering, did this major book, that sold so many copies, miss the cultural moment so narrowly?

I did what I always do when faced with these sort of questions, and headed to Google Trends (where Google measures interest in various search terms). What I found raised my eyebrows.

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The privilege line kicks up to a new level in around late 2008, early 2009 –  the precise time the book was released. Is it possible, I asked myself, that we’re looking at cause and effect here? Did the book make people more interested in the concept of privilege?

Of course, people were googling the term both before and after the book’s release – but some of the traffic will be completely unrelated to this sense of privilege. (A fair part of it will be people trying to check the spelling).

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A tricky one.

The lift in interest in searches for privilege still needs to be explained. The 2008 US Presidential election and the identity of its winning candidate is definitely a possible explanation for a rising interest in the role of privilege in society at that time. But what makes plausible the attribution of at least some of the lift in interest to Gladwell is the incredible success the book had. Outliers hit number one on the New York Times bestseller list upon debut, and stayed there. It went on to sell over 1.5 million copies and on the way became a sort of cultural touchstone.

Nowadays, Malcolm Gladwell’s combination of popular style and popular success makes him unfashionable. (The public refutation of the 10,000 hours rule didn’t do wonders for his brand either.) Few would attribute their  awareness of the role of privilege in society to Gladwell.

While pondering that, consider this quote from John Maynard Keynes:

“Practical men who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.”

(For “practical men” you may substitute “insurgent cultural theorists with impressive numbers of twitter followers.“)

Now, I’m not saying that Malcolm Gladwell invented the concept of privilege. Clearly, the concept has been a part of the study of humanities for a long time. I’m not even saying that he introduced people to the academic sense of the term. The word is far from prominent in the book. But he does relentlessly slay the conception, so dominant until recently, that success depends solely on hard work or inherent talent.

Gladwell lays bare several structural factors that lift some people up while holding others back. And more important than that, he makes those factors memorable. In doing that, Outliers potentially opens minds to a more critical analysis of why some people – and some types of people – seem to be able to squeeze more out of society.

That may have prepared the earth for a rising interest in the topic of privilege as the years have gone by, and the more recent and far more dramatic upsurge in awareness of the concept of privilege when it comes to race.

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If this is even in some small way Malcolm Gladwell’s intellectual legacy, then Outliers was a particularly powerful book. If I can, using techniques stolen from him, write something with a fraction the impact I’ll be delighted.

Thomas the Book Engine

I’ve written three book proposals in the last six years.

The first one failed after an agonising process. The second one failed far more completely and spectacularly. The third one though?

The third one just turned into this…

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And I’m suddenly on giant roller-coaster of anxiety and excitement… !!

  • Seventy-thousand words to write by the end of the year. (Actually probably more to allow for editing down. Eek!)
  • Topic: incentives. (Suggestions for chapters gladly accepted…)
  • Goal: write something I’m proud of.
  • Sub-goal: write something lots of people want to buy!

How a cognitive bias is causing this tech bubble.

This post is not altogether different to my last one, on how we might be overestimating the capabilities of robots. The theme is the same. We are putting a frightening excess of faith in the future of technology.

We sit at an inflection point, extrapolating it to the stars.

Technological progress seems suddenly overwhelming. But there is reason to expect a breakdown in the recent rate of growth, reason to expect that we’ve grown deluded about the prospects of the silicon-based slice of progress we like to label “technology.”

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I wrote about this the other day in my regular column over at News.

Suddenly people are taking seriously all the following ideas:

Plans to colonise Mars;

Driverless cars taking over our cities within just a few years;

Flying cars;

Robots putting practically everybody out of work;

Artificial intelligence becoming so powerful it destroys us;

Cryogenics letting us come back from the dead;

Crypto-currencies taking over from money.

This is not just about people speculating on the future of a few companies. This is about believing the life of humans is about to change faster than ever before in human history. It is like a belief that we’re living through the agricultural revolution, the Renaissance and the Industrial revolution all at once — and all in fast forward.

Why so credulous?

Why do we suddenly believe technology will remake the future so utterly and swiftly? Partly because of a cognitive bias called the recency bias. We remember the recent past much better than the time before it. And in the recent past, technology has wreaked havoc on modern life. You’re reading this on a website that didn’t exist before 20 years ago.

In the past 20 years, the world has changed a lot. And technology has been a big part of it. But that doesn’t mean technology can change everything. The personal computing technology we all interact with daily has made it very obvious to us that technology can change very fast.

But this is a classic case of selection bias. If we try to measure the pace of technology by looking at the things that are changing very fast, we will get the wrong picture. We need to look elsewhere too.

If you tried to measure the pace of technology by looking at commercial aviation, say, what you’d discover is a lack of obvious progress. We used to have supersonic commercial aviation, but nowadays most of us fly around in Airbus A320s (a plane launched in the 1980s) and Boeing 737s (a plane first launched in the 1960s).

You can get a similarly glum feeling if you look at progress in fighting Alzheimers disease or Multiple Sclerosis. There hasn’t been any, despite a huge amount of effort. Likewise with the common cold — and we seem to be losing the battle against bacteria as they develop antibiotic resistance.

I don’t mean to say that technology won’t change. It can and surely will. Just to say that there is a certain wildness to the predictions of the future at the moment. People seem willing to believe just about anything, so long as it has a technology angle.

When the bubble finally pops, it will take with it not only the valuations of some of the biggest technology companies, but also a lot of utopian visions of the future.

In the News story I call it a recency bias but you might as easily call it an availability bias. We are very willing to believe technology can change the world utterly and quickly because in living memory personal computing has created very visible changes in our daily lives. (Maximally visible, but not necessarily maximally important – the famous hypothetical is whether you’d give up the internet before you gave up indoor plumbing.)

IT’S THE STUPID ECONOMY

These cognitive biases have been allowed to grow unchallenged because of the peculiar financial circumstances of the times.

Some people argue the loose monetary policy of the last decade does not explain high asset prices, but I think they’re wrong. The simultaneous global bubbles in property, bonds and tech stocks almost certainly trace their roots to the low/zero/negative interest rates across much of the world, and quantitative easing that left developed economies awash with liquidity.

The money flood provided patient capital that gave companies with scant profits a long time to experiment and expand revenues. If you’ve ever taken an Uber using a 50 per cent discount, you’re using some venture capitalist’s money to improve your own lifestyle, while simultaneously propping up the impression that new tech is destined to remake the known world.

(For what it’s worth, Uber is pretty big improvement over taxis! But its major advantage comes from taking on a regulated market with colossal rents, rather than being inherent to the app.)

The money flood has propped up some far more dubious beliefs than the prospects of Uber. The faith certain investors have in Tesla’s ability to win a giant share of the “shared mobility market” (fleets of driverless taxis) is intriguing to me.

Path to price target

Valuing a junior company on the prospects of winning a large share of a market that doesn’t yet exist, using technology that is in its infancy? It seems, um … more optimistic than is prudent. If this kind of thing works for Elon Musk, perhaps he should also set up Red Real Estate and start selling rights to land on Mars.

The NASDAQ chart above explains why the cognitive bias we’ve developed has been allowed to progress so far. It’s a feedback loop from confidence, to investment, to expanding revenues, to stock prices, to headlines, to confidence.

And Bitcoin?!  … . Actually no. Let’s not even talk about Bitcoin.

(Non-financial evidence that technology really is changing the world, in the shape of temperature records and CO2 concentrations, doesn’t seem quite so influential on the mass mood. I leave it to the reader to ponder why.)

Eventually, the technology cycle of misplaced confidence and out-sized valuations will find it has reached the highest possible equilibrium and begin to tack backward.

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“The trend is your friend, til it bends.” – Anonymous.

It is likely to do that even absent a macroeconomic reason, but one is coming anyway.

Interest rates are rising in the United States and inflation is lifting. The anti-Keynesian Trump stimulus – adding fire to a booming economy – looks set to intensify those trends. The Fed is now slowly soaking back up loose money. This represents a clear and present danger to any asset whose value is not based on making real money right now.

If the market values of all those tech stocks fall, the stories they told about the future will suddenly appear thin. A pin will prick the bubble of credulity and the stories of inevitable autonomy, existential AI risk and imminent interplanetary expansion will fade from our front pages. The distance between the pssible and the probable will lengthen again.

So I’d like to place a stake in the ground and say we will look back on this era – with a TV show called Silicon Valley; a plan for Elon Musk to become the richest man in the world; non-stop headlines about drone delivery; and a relentless faith driverless cars were just a few months away – with a kind of nostalgia for a simpler and more optimistic time.

 

The world’s smartest robot, falling down the stairs

This post asks if we are making a mistake in the way we anticipate the future of robots and intelligent machines. It is all based on my perceptions and understanding of how far our digital assistant/nemeses have got so far. Please comment below if you know of progress I appear not to be aware of!

I’ve been reading a lot about robots, artificial intelligence and machine learning. I am trying to weigh up what it all means. Will jobs disappear? Whose jobs? Who stays in work what do they do? Will we even need to work in future?

One machine I am definitely excited about is the new best player at chess. It dominates   because we demanded that it teach itself. Within a few hours it beat one of the top systems in the world. That is exciting and also terrifying.

And yet. Some robots are still utter rubbish.

The Jetsons’ robot maid is nowhere to be seen in my life. There is little evidence of robots coming to dominate in many of the domains people insisted they would.

Voice recognition, for example, remains underdeveloped, despite years of focus. And yet the machines can turn around and defeat us at Go, the one thing we thought we could edge them on for another few years.

It seems to me we are bad judges of what intelligent machines will be good at.

Often, the machines are better at things we consider hard than things we consider easy. One of the first things machines came to dominate at was chess (a game for the human intellectual elite). They remain truly appalling at soccer (a game for everybody).

We assume things children could do will be easy for robots. And we scream with laughter when they find them hard. Later, we are amazed when machines can easily outstrip us at things only the smartest adults can do. This paradox needs resolving.

Why are they smartest at hard things and dumbest at easy things?

Are we benchmarking things wrong? Perhaps we over-emphasise how smart the adult human is; how capable of operating effectively in the abstract world. And underemphasise how physically capable the average adult human is in the material world.

Maybe what we see as hard is just abstract; and what we see as easy involves manipulating the infinite variability of the real world.

From where I work I can watch two turtle doves improving their nest. One flies out, finds a stick or bit of grass, and brings it back. The other takes it and works it into the existing structure with a wiggle of its head. I doubt we could program two drones to do that, even with a decade and a multi million dollar budget.

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The nest in question. It is described by birdsinbackyards.net as “a loose platform of sticks” and is probably the worst nest in the whole avian kingdom, but still better than robots can do.

How different are we from the animals? Is it possible the animal parts of our brain are actually  far more advanced than the human parts of our brain? Our software has had aeons to work on things like navigating 3D space, recognising and manipulating never before-seen objects, hearing and identifying sounds. But only a few dozen millenia to work on the higher human plane of logic and abstraction.

Computers operate in that abstract world and are – mostly – killing us at it. Arithmetic is their bread and butter. Accounting, logic and other kinds of rule following that defined human intelligence until quite recently are firmly within their grasp.

Yet machines attempts to navigate the physical world are mostly poor. If you consider how refined those animal circuits are, is it any wonder that machines still can’t do these animal things? If what we can do easily is actually very hard, it might be less surprising that our first iteration at self-driving cars smashes into giant objects right in front of them. And we might approach the task of training robots to interact with dynamic real world space with more humility.

ROBOTS TAKING OUR JOBS

If we have misconstrued the extent of human skill in various domains, could that lead to confusion about what tasks can easily be automated? Everyone seems to think truck driving is due for immediate automation. What if that is because of a sense that truckies aren’t smart?

Many people assume a chess-playing computer must also be able to do everything a person of everyday intelligence can do. Here’s Tesla CEO Elon Musk, speaking at the company’s annual earnings call on 7 February 2018.

“I am pretty excited about how much progress we are making on the neural net front… It is also one of those things where it is kind of exponential. … It doesn’t seem much progress, doesn’t seem much progress and then suddenly: Wow!

“That has been my observation generally with AI stuff . And if you look at what Google’s DeepMind did with AlphaGo. It went from not being able to beat even a pretty good Go player to suddenly it could beat the European Champion. Then it could beat the world champion. Then it could thrash the world champion. Then it could thrash everyone simultaneously.

“Then they had AlphaZero which could thrash AlphaGo! And just learning by itself  was better than all the human experts.

“It is going to kind of be like that for self-driving. It will seem like this is a lame driver,  this is a lame driver, this is a pretty good driver … [then] holy cow this driver is good!”

It seems to follow logically, but it might not.

We value abstract cognition because it is rare in humans. But we don’t value what is profoundly and abundantly available to us – skill in moving through the real world.  That’s why the stock analyst gets paid more than the taxi driver.

Yet traders are already being replaced with algorithms. Taxi drivers – not yet. That could be a warning signal, and our model of intelligence could be impeding us from seeing it.

The smartest people applying neural nets to self-driving vehicles say they are still a long way off.

Those who think fully self-driving vehicles will be ubiquitous on city streets months from now or even in a few years are not well connected to the state of the art or committed to the safe deployment of the technology. For those of us who have been working on the technology for a long time, we’re going to tell you the issue is still really hard, as the systems are as complex as ever.”

And that’s just the driving part. There was a great post on Marginal Revolution last week about the complexity of a truck driver’s job.

“I wonder how many of the people making predictions about the future of truck drivers have ever ridden with one to see what they do?

One of the big failings of high-level analyses of future trends is that in general they either ignore or seriously underestimate the complexity of the job at a detailed level. Lots of jobs look simple or rote from a think tank or government office, but turn out to be quite complex when you dive into the details.

For example, truck drivers don’t just drive trucks. They also secure loads, including determining what to load first and last and how to tie it all down securely. They act as agents for the trunking company. They verify that what they are picking up is what is on the manifest. They are the early warning system for vehicle maintenance. They deal with the government and others at weighing stations. When sleeping in the cab, they act as security for the load. If the vehicle breaks down, they set up road flares and contact authorities. If the vehicle doesn’t handle correctly, the driver has to stop and analyze what’s wrong – blown tire, shifting load, whatever.

I’ve been working in automation for 20 years. When you see how hard it is to simply digitize a paper process inside a single plant (often a multi-year project), you start to roll your eyes at ivory tower claims of entire industries being totally transformed by automation in a few years.

COUNTERPOINT

Perhaps this argument is upside down. Perhaps we chose not to make computers good at the material word. Perhaps we  trained computers to do abstract things because only a few people can do them. To get the benefit of training a computer we must set it on tasks where human skill is rare. It is not that they couldn’t do what we can do, just that we haven’t put in the effort.

FINDING THE PATTERNS TO RECOGNISE

I suspect the problem is not so much in asking computers to process the data produced by manual tasks as getting them to identify it as data.

In an abstract world data is always in the right place and fully visible. In a spreadsheet, the data you need will always be exactly in the right place. And if not, nobody expects the spreadsheet to figure that out and fix it. In the physical world,  information might be harder to find. Where’s the label on this box? Where’s the face on this human? Where’s the road under this snow? etc.

We already know how you can get robots to take on jobs in the material world. You need to standardise the inputs. Robots do a wonderful job welding things that come down a production line. They do a great job driving trains in wholly separated systems. They do a perfect job of driving lifts up and down lift-wells, etc. In these cases we give the material world the standardised appearance of an abstract one. Take away the production line, the protected rails and the lift-well, and those systems are all at sea.

Neural nets will of course be much smarter than the computers that drive lifts. They will be able to parse information from the material world. Self-driving cars can use cameras, radar, lidar and 360 degree vision to get advantages over us in sensing. These systems should be able to learn fast.

But I am not yet  convinced we can apply the lessons from an abstract world which has only 64 different locations, to a real world which is infinitely more complex. Assuming those lessons will cross over  is the exact kind of intellectual trap a cognitively limited species would fall into.

 

 

OPTIMIST PRIME: TESLA IS IGNORING A TRUCKLOAD OF RISK

Was the problem a shortage of cool plans? I didn’t realise the problem was a shortage of cool plans.

Yesterday, Tesla announced two new vehicles – a semi trailer, and a roadster. The launch was awesome.

Musk does theatre like a natural. Adding to the happy vibe was that he spent no time covering Tesla’s big problem, which is delivering on existing plans. Instead, he added more plans.

Here’s the problem with plans. Not everything works out. The more plans you have the more chances for something to go wrong.

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When you have many independent systems, adding an additional system adds to your chance of one working.

However when each system is interlinked (by, say being in the same corporate structure, or worse, by being an input to another system) the rising chance of one failure increases the chance of mutliple failures.

For example, the gigafactory battery plant is an input to the Model 3 production line. Failures at the gigafactory are holding up production, imperilling the Model 3 and the whole company’s cashflow, and therefore its survival.

When you have interlinked systems, risk management is, in the long run, almost everything.

If you google “Elon Musk” and Risk, you find a lot about him worrying about the risk from artificial intelligence to human survival. And I could see nothing about him discussing his approach to risk management in business.

SELF CONFIDENCE

Elon Musk has a longstanding pattern of managing risk by insourcing. When something’s not going right he tries to solve it by doing it in house, or even personally.

Most recent example is the purchase of the tooling company Perbix. … Prior to that they sacked their self driving supplier MobilEye and rebuilt the systems from scratch. Before that they bought Solar City.

Is it clever to insource everything?

Nobody wants their supplier to go broke because they forced the supplier to take on too much risk. If it happens you’re short on inputs. But if you bring the problem under your own roof and find it can’t be solved then you’re short on inputs and in a financial hole.

A list of things Tesla is doing in house that a regular carmaker doesn’t is… eye-opening.

  • Fuelling stations
  • Dealers
  • Repair shops
  • Energy generation and storage systems. (solar panels and batteries)
  • Developing autonomous driving systems

All of these are tricky. They may cost more to do than expected.

Just because this looks like a car company doesn’t mean it has the risk profile of a car company. Building cars is not the only prerequisite for success.

And of course Tesla is having all sort of trouble building cars. It has had big hiccups making the batteries and doing the welding. It also likely can’t fit all the planned production inside its current factory, meaning it will need a new factory to hit 500,000 cars a year. Tesla is being broadly upfront about this, with Musk referring regularly and breezily to “production hell” – although without giving much detail.

Solving production hell will take management effort and money. But the two new vehicles will divert effort and money. A juggling analogy may be apt. When you add extra balls, the juggler trying to control them drops the lot, not just the new ones.

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You need every column to line up to win.

The recent release of negative stories about the culture inside Tesla may be an indicator a breaking point is near.

OPTIMIST PRIME

The Roadster has some serious technical questions to answer, but – if it can be built – of course they can sell a lot of copies. It’s the world’s fastest car from the world’s coolest brand.

The truck, however, is not certain to sell. While consumers buy on brand and image, the logistics industry is relentlessly optimised around cost. The range Tesla’s truck offers (500 miles) demands an enormous battery, which will make the truck expensive to buy and increase its weight by an estimated 12 tons. That weight matters for at least three reasons

1. The total weight to payload ratio changes, offsetting some fuel advantages.

2. Road damage increases exponentially on a weight per axle basis and governments are increasingly keen to get the logistics industry to pay road user charges based on weight.

3. Trucks are sometimes empty and carrying a battery at those times raises the cost.

The truck also means Tesla had to invent a whole new charger to make sure their trucks could be charged in a reasonable time (30 minutes for 400 miles). It is unclear to what extent this new Megacharger has been invented as opposed to just envisioned. It is further unclear how much they might cost to install, or if they are compatible with existing electricity distribution infrastructure.

Incidentally, the time it takes to charge a vehicle means Tesla may need to install a high ratio of chargers to vehicles on the highways. We’ve all pulled into a petrol station to find all the pumps are in use. You wait three or four minutes and they become free. If the person in front of you is going to take 30 minutes to charge, and then you’re going to take another 30 minutes, you’ve got an enforced one hour stop. God forbid it’s busy and there’s more than one person in line in front of you.

The way for Tesla to combat this inconvenience is by installing *a lot* of chargers at places where people are taking long trips. (This problem should not apply at home, where people can charge their vehicle overnight, but it would apply if you’re doing distance travel, and especially to semi trailer trucks.)

CAPITAL IDEA

The Tesla semi trailer and the roadster are, however, not just extra risk. They can help Tesla raise capital it sorely needs. Pre-orders of the first 1000 roadsters are available by putting down $250,000.  If they can find 1000 people willing to put 250k on ice for a few years, that will put $250,000,000 into Tesla’s pockets. Its most recent cash burn was $1.4 billon in a quarter, so $250 million would buy them an extra three weeks.

Every little bit helps!

Think I’m being excessively mean? Read why here: Why does Elon Musk make me so Cross?

 

 

 

 

 

Money for jams

Congestion charging is back on my list of good ideas

For a while there, I was influenced by the equity arguments against it. The lack of substitutes to travel, and the unique role of commuting to work in a person’s well-being tipped me against congestion charging. Good economic reform doesn’t throw out equity every time it can get an efficiency dividend, and I decided congestion charging equity problems made the policy unworkable.

I dreamed up a ‘clever’ scheme that was a halfway-house to full congestion charging, preserving the substitution effect of a price rise, but without an income effect.

But I’m swinging back to support for a simpler price signal. What has captured my attention is the following graph from a new Grattan Institute report. It shows the extent of congestion in Sydney. Amazingly, most people experience almost no congestion. Their commutes are swift.

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What this tells me is the the impact of a congestion charge is actually not likely to be widespread. Serious congestion, of more than ten minutes in a trip, is the purview of a small subset of commuters.

That  subset is likely to be going into the CBD, where congestion is real.

Screen Shot 2017-10-05 at 6.04.58 PMRemember that despite the importance of CBDs, most jobs are still in the suburbs.  If we know one thing about CBD jobs – especially nine to five CBD jobs – it is that they tend to be the good kind.

City centres are where the business services jobs are. The specialised jobs that pay big coin, as opposed to the population-serving jobs (pharmacies, florists, bakers, doctors, schools) that are found disproportionately in the suburbs.

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It looks like driving into the city in peak hour is an elite problem. No wonder it gets so much attention. The Grattan analysis makes it clear the congestion charging would really only have to be applied in a narrow area.

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This fact also counters the argument that congestion charging can’t be introduced until better public transport happens. Melbourne and Sydney have radial public transport systems that provide terrific CBD access.

 

Traffic is bad. The absence of price signals on the use of existing infrastructure causes crowding and delays. You end up listening to way too much FM radio. But that might not be the most costly effect. The big downside is probably the pressure to build yet more infrastructure.

Daniel Andrews has green-lit the West Gate tunnel – a big freeway that will not only soak up $5.5 billion but also lock Victorians into a regimented tolling regime (not a congestion charge system) for decades.

Big freeway projects have a lot of side effects.

One is making the places that they travel through less pleasant. Place-making is a big theme in urban planning now and a lot of money is spent on making areas seem nice. This “tunnel” which is actually an elevated road for a good section of its length,is kind of the opposite of place making.

A second side effect is city-shaping. You can cut travel times to the city, but that encourages yet more sprawl and inefficient urban form. (Thanks, marchetti’s constant._

If you want a policy that is likely to be equitable, can potentially conserve scarce government funds for more valuable projects, and prevent the paving over of the inner city, then congestion charging is your horse.

To finish with here’s some data to make you go “huh!” – rain, apparently, has no effect on traffic:

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Doctors and drugs: when we can’t trust the white coats

Sometimes you can see a policy change coming a mile off. For about the last two decades, drug legalisation looked like such a case.

The positive results of decriminalisation in Portugal, and the examples of marijuana legalisation in Uruguay and various states of the US were becoming more widely known. The Penington report in 1996 argued for decriminalisation of marijuana and when Victorian Premier Jeff Kennett ignored its recommendations it was seen as a stance justified only by retail politics.

It seemed only a matter of time before expert recommendations on decriminalisation and legalisation  were taken on board by Australia and nations across the world.  An armistice was about to be announced in the increasingly stupid war on drugs. So it seemed.

P1010100

Then the opiates crisis began. America is in the grip of a really shocking wave of premature mortality, caused by addiction to opiates. The scale of it is really awful – at 32,000 deaths a year, roughly equal to the numbers killed by firearms in that country.

(If you’d like your faith in journalism to be restored utterly while your heart is smashed into a million irrevocable pieces, I recommend this piece, Seven Days Of Heroin, from the Cincinatti Enquirer.)

The US opiates crisis has forced some hard thinking on the merits of legalisation (for drugs beyond talking about drugs beyond marijuana, mostly.)

The rethinking of legalisation has come from the left, like this piece at Vox: I used to support legalizing all drugs. Then the opioid epidemic happened.

And from the right, like this piece at the National Review: The Opioid Crisis Should Kill the Call to Legalize Hard Drugs

Opiates are not only a gateway to heroin abuse but a problem in themselves. Legal opiates accounted for 20,101 overdose deaths in the USA in 2015 compared to 12,990 related to heroin. If a legal drug, tightly controlled by law and available only under prescription, can be abused in a way that spirals way out of control, what does that say about the prospects of ending prohibition of drugs?

TOO MUCH TRUST

With legalisation, nothing is going to end up as available as buying flour at the supermarket. There will always be controls – regulation, licensing, etc. Choosing them is critical. But there is one shortcut we tend to take.

We love to rely on doctors as one of those controls. “Only available via prescription” sounds like a big barrier to drug availability. We have a lot of trust in doctors at a personal care level and that transfers over to a policy level.

But a look at the US medical marijuana system reveals that prescriptions are available ridiculously easily, over the internet, for trivial complaints. The controls in Canada are not much tighter. Doctors are like anyone and are subject to incentives. If they can make money writing quick and dirty prescriptions, some will.

Meanwhile, even the best-intentioned doctors are at the mercy of a pharmaceutical system that is itself far from perfect.

(If you’d like your faith in journalism to further cement while your faith in capitalism is smashed into a million irrevocable pieces, I recommend this piece, ‘You want a description of hell?’ OxyContin’s 12-hour problem, from the LA Times. It describes how a big Pharmaceutical companies lies about its products, got loads of people hooked on opiates and evaded a whole lot of systems designed to stop exactly that from happening.)

To some extent this is like the story on Elon Musk yesterday. It bothers me when too much trust is vested in an entity, person or institution that doesn’t deserve it. And nobody deserves as much trust as we invest in doctors without an panopticon of ombudsmans, review committees and inspectors.

I think we can move towards legalisation of drugs. But what is crucial in regulating anything is the fine details of the way they are controlled.

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Hoops to jump through

I wrote about this in The Right Amount of Smoking. Finding the exact sweet spot for control and legalisation is hard. You can fiddle with public and private ownership of suppliers, taxation, occupational licensing, sales licensing and controls on consumption.

At this stage, we probably don’t have enough controls for gambling, and we have too many of the wrong kinds for most drugs.

Finding the right kinds of control is hard and requires ongoing adjustment of the policy settings. Trying to outsource the difficulty we have in solving that to doctors is an attractive shortcut, but not the answer.

 

Why does Elon Musk make me so cross?

Elon Musk gets on my nerves. Whenever I see him in a headline my teeth start grinding.

But why? I agree with all his goals. I love the idea of clean energy. I want better batteries. I’m excited by colonising the universe and digging cheaper tunnels. So why does his every pronouncement get me upset?

I’ve been dwelling on this recently, and can only conclude it’s because of the lack of public skepticism he encounters.

Whenever I think about the future, I like to consider it in probabilistic terms.  So when I hear Elon Musk talk about using rockets to travel from New York to Sydney in an hour, I naturally try to imagine what the likelihood of this happening is. I generally come up with numbers awfully close to zero.

Apparently other people’s thinking goes off in different directions, wondering about comfort during take off:

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I don’t find myself thinking about g-forces. I’m too busy puzzling over why he should be able to make a roof including solar panels for less than the price of a roof. What does he think roof manufacturers have been doing for all this time?

Musk is not short of ambition or afraid to make his life more complex. For example, the original Telsa plan had nothing in it about automation or self-driving. He just bolted that onto the plan, presumably expecting it would be doable if the engineers just tried hard enough.

I remain skeptical.

When people think about the progress of science, they have an awful tendency to be swayed by survivor bias. They think especially about progress in personal electronics – because that’s where the progress is. They infer that technology can utterly transform itself with a decade or two.

But when you take a broader sample, you see something different. For every iPhone that did get invented, a flying car failed to be. While we beat back AIDS, cures for dementia and multiple sclerosis languished. And not for want of effort. You can’t tell in advance which fields will yield to effort.

I was a big fan of an old website called Paleo Future, which goes back and looks at old predictions of the future. They’re mostly silly.

In fifty years, most Musk plans will seem as silly. But they’re being repeated across all forms of media. That credulity, and the adulation that goes with it, really rustles my jimmies.

WHY SO CREDULOUS?

There’s a well-characterised cognitive bias where we think that a person who has success in one field will be able to translate it to another. It’s why former Olympic swimmers get hired by big financial institutions, say. It explains why we think Elon Musk can set up a dozen companies including in busy fields like automotive and tunnelling, and come out a winner.

The other relevant cognitive bias is the base rate fallacy. People ignore the fact that in a given domain (colonising space, say) background probabilities of success are very low. They prefer instead to focus on some other seemingly salient factor, like whether the person making the plan to do so is a genius. (And I’m perfectly willing to admit Musk is.)

Now, the charm of having so many cognitive biases running in your favour, is you can attract a lot of capital and hire a lot of good employees. You get to make a lot of bets at once.  Take one 5 per cent chance, you’re set to fail. But take ten and you have a 40% chance of one of them coming good.

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So I’d be surprised if everything Musk tries from hereon turns to poop. He can probably go down in history as a genius inventor. But at the moment he’s getting way ahead of himself.

STRATEGIC THINKER?

Musk’s strategic thinking has worked well so far for Tesla, but past performance is no guarantee of future performance. You only need to look back on his Tesla “Master plan Part Deux” from 2016 to get a sense of how iffy it can be. It contained a very peculiar section on taking the aisles out of buses to make room for more seats. Ignore for a moment that aisles are important to buses – the point is that that kind of fine detail has no place in a strategic plan. Shortly afterward, he walked back the whole section on buses anyway.  The whole thing made me wonder if his success came because of or despite his strategic vision.

It is possible that long before he has a chance to be proven wrong on intercontinental travel, Mr Musk will have a reversal of fortune.

MODEL 3

Tesla’s plan to ramp up production of Model 3s in a new facility looked risky to me from the start. Manufacturing is hard and Tesla is new to doing it at scale. Today we learned initial production of the smaller more affordable car has fallen short.

The company has identified ‘a handful’ of bottlenecks in its production systems and produced way fewer Model 3s than it planned (260 vs an expected 1500). I fear that for a company doing its first ever mass-production, solving that handful will only reveal another handful. Complex systems are interlinked and problems can cascade throughout.

Expecting to move smoothly to mass production was pure hubris – big new projects regularly have huge cost overruns and delays.  (I used to work on Defence projects so I’ve seen cost overruns and delays.) Furthermore, in making its new factory, Tesla skipped a step most manufacturers use, getting all its tooling made before they’d had a dry run. That will save time and cost only if all the systems fit together neatly and as expected.

I understand why they’re rushing. There’s two reasons Tesla must sprint to survive.

First, so much debt has been brought on that they need a lot of sales to pay the interest (with the share price so high I don’t understand why they wouldn’t just issue shares, which don’t need to be periodically refinanced).

So far Tesla burns cash just to stay running. Having big debt and negative cashflow is not sustainable. There’s not many times corporate finance is heart-in-your-mouth terrifying, but Tesla is making it like watching one of those guys in a wingsuit.

Second, the longer they delay the more competitors with proven manufacturing ability can catch up and steal the market. The Chevy Bolt is a proven success and we heard last week that even vacuum manufacturer Dyson is entering the electric car market. A Bloomberg article published today had a huge list of Tesla competitors. Fifty new electric vehicles are going to hit the market in the next five years, from companies with a strong history of making quality products.

I think the Tesla corporate structure needs careful steering to not end up on the rocks. The technology and brand could well be for sale within five years, and gleefully bought up by someone like General Motors or Google. That’d be awful for Tesla investors and employees but mostly fine for society, as the losses incurred in creating all this technological progress would be internalised by all the investors who’ve done their dough.

SHOULD I BE SO MAD?

So am I justified in being so cross at Elon Musk and all the people who believe in him?

One argument is I am not. To the extent that he is making great progress, I should shut up, and to the  extent he is selling risky bets, his main victims are private investors who are welcome to include in their portfolios a few risky bets.

While money will be wasted, technology will also be created. If it has value, that technology will presumably be up for grabs if Tesla (or SpaceX, or Hyperloop) ever needs to make their creditors whole, and society will still be able to benefit from them. From this perspective, the cult of Elon Musk is just a big scheme to get private investors to take the risks of moving science forward. And it’d be awfully pig-headed to be mad at that.

From another perspective, investor money is finite, and we should be careful to steer it toward those schemes with the highest chance of success.

So tell me, dear reader. Am I being too much of a grouch toward Mr Musk?

Have we found a way to finally get Australia to do preventative spending on health?

I love government. But it is not a blind love. Government is not done as well as it could be. I’m very much for the idea of achieving collective goals to improve society, and very much open to reforming how we do that.

Here in Victoria we have two of the most potent and innovative public agencies: TAC and WorkSafe. The Transport Accident Commission works to reduce injuries and deaths from transport accidents. Worksafe works to reduce injuries and death at work.

They do a lot of good preventative work. Both have been very effective.

Victoria has the second lowest workplace accident rate in Australia, measured by fatalities (after the ACT) and by workcover claims (after the NT), as these next two figures show.

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Victoria also has some of the best road safety performance in Australia. It has improved substantially over the last decade, as the next chart shows. (Of course, improvements in safety also come from improvements in cars themselves, but via programs like How Safe Is Your Car? the TAC encourages Victorians to buy safer cars, accelerating those positive changes.)

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What makes Worksafe and the TAC effective?

  1. Reason one is their independence. (The 2014-15 blip in Worksafe performance that you see in the above graph may be related to the state government meddling with its operations at that time. Independence matters.) They are statutory agencies free from direct ministerial control, giving them the ability to take extra risks.
    The innovations that are most visible to the public are their communications – Worksafe sponsors a football team while the TAC pioneered using TV advertisements to change culture and reduce the road toll. This kind of communications strategy is rarer in government departments, where ministers face tough questions over spending.
  2. The second, related reason is that these are not just policy agencies but insurers. Worksafe takes premiums from employers, and TAC from car registrations. They pay out when a worker is injured, or when a person is injured in a vehicle accident. This gives them not only a funding source independent of annual budget rounds, but also a clear financial incentive. (nb. Worksafe is also the workplace safety regulator and inspector, giving it further powers. TAC is not.)

These are both world-leading organisations which have had powerful positive effects on society, and organisations whose successes I have admired.  So I was excited to see, earlier this year, the head of the Productivity Commission throw up a powerpoint slide with a dot point that argued we should Address disease prevention as directly as we address workplace accidents.

I was immediately captivated by the idea of using the Worksafe model to try to fight disease. The upside looks to be huge. Australia’s preventative spending on health is fairly terrible, as is well-documented, and was again confirmed in a paper by two Public Health academics in July this year. 

“Treating chronic disease costs the Australian community an estimated $27 billion annually, accounting for more than a third of our national health budget.

“Yet Australia currently spends just over $2 billion on preventive health each year, or around $89 per person. At just 1.34 per cent of Australian healthcare expenditure, the amount is considerably less than OECD countries Canada, New Zealand and the United Kingdom, with Australia ranked 16th out of 31 OECD countries by per capita expenditure.”

Could we fix the preventative health spending deficit by setting up organisations akin to Worksafe and the TAC? Might it have the exact combination of novelty, innovation and actual prospects for success that could make politicians and public servants agree on it?

At a high level the opportunity seems to be there (for preventable diseases but not, so far as I can see, for non-preventable ones like MS). Does it persist when you dive down into the details?

THE DEVIL INSIDE

Imagine you were setting up a statutory insurer to fight against adult-onset diabetes. The insurer would collect premiums and pay for treatment after a person was diagnosed.

The big question is where the premiums would be levied.  There is a key difference between this scenario and the workplace safety situation. Employers opt in to insuring employees when they hire them. Likewise, road users opt in to the TAC scheme when they register a vehicle.

The sort of population-wide coverage required by a diabetes insurance scheme means the beneficiaries could not be expected to cover their own premiums. (i.e. not without undermining the public nature of the health system! This fact may motivate some skepticism towards this idea from people who fear it is a Trojan horse for dismantling public healthcare. I don’t think it is.)

IT ALL COMES BACK TO CANBERRA

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The only plausible premium-payer would be the federal government. That raises the question: How different, ultimately, would this be from Medicare? If the government is paying premiums into a public insurer and taking out the payouts to cover treatment costs, isn’t this just replicating an existing system?

The answer is it might be a replication. But if there is something in the culture, funding or control systems of the Health Department that makes it less than optimally effective, then there is a chance of improving outcomes by making a new organisational structure.

Following the Worksafe and TAC models, a good insurer would be focused on a single disease or group of diseases that we have at least some ideas how to prevent (lung cancers, diabetes, heart diseases). It would work on culture change and system changes to try to find the most cost-effective ways of reducing the incidence of that disease. (As an example of systemic changes, the organisation paying the premium might be more inclined to levy a sugar tax if it knew that would reduce its premiums for diabetes insurance). If it had success, the premium it would have to charge to the government for coverage would fall.

NDIS-ESQUE?

Any such systems would be different from the NDIS. The NDIS is far more about organising and coordinating the care for people who have disabilities. It is premised on helping people after the fact and is a vital service.

It does not seem, so far as my reading has shown, to have a focus on identifying avoidable disabilities and investing to avoid them. ( I am sure there are exceptions down in the details but at a high level NDIS is more about service-delivery than prevention.)

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Sometimes puppers are not relevant to the post so much as reward for reading so far.

ISSUES

I’ve painted a picture above that I find promising, but I’m not going to expire in the proverbial drainage channel for this idea. I can see its weaknesses.

For starters, this looks like a case of bower-bird problem solving. You spot a shiny thing (TAC, Worksafe) and take it back to your nest. Then you’re seeking out a good way to use it. That is different to taking a first-principles approach to figuring out how best to optimise preventative spending. There may be better ways. And it could be that the azure sheen of TAC and Worksafe blinds one to the inherent unsuitability of the model in other environments.

Secondly, I may have mis-identified the effectiveness of those two organisations. I know their existence correlates with big improvements in the outcomes they’re targeting, and I know they are well-regarded but I can’t show causation. Other jurisdictions have similar organisations that are not as effective.

Third, the advantages might all fly out the window when you have the federal government paying the premiums rather than other customers. That’s a powerful customer and it might be hard to fight for justified premium hikes in tough fiscal situations, in which case the independence of the agencies becomes blurry.

Having said all that, I’d love to see a superlong .pdf  getting into the guts of this idea and figuring out whether there is promise in it. If you work for a thinktank or a department and you’ve already written such a thing, please let me know!

Anyone else, please leave a comment sharing any insights or aspects you think are relevant!

Octagons and smashed avocado: a good Eixample?

I just got back from a little holiday that took me to Barcelona.

In Barcelona I was thrilled to stay in the famous Eixample district. In the kind of urbanism blogs I like to to read, Eixample has been used so often as an example of density done right, that I was pretty stoked to get a taste of the life it has to offer.

Eixample is famous for its donuts. Not the bready treat, but the shape of its blocks. (Spanish calls them manzanas, or apples, but I call them donuts.) They are octagonal blocks exactly 133m in length.

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The six to eight storey buildings of this “newer” part of Barcelona are often held out as a counterpoint to the fifty storey needles I can see piercing the sky above Melbourne. So I had high expectations of the experience I would get when I booked my airbnb in the heart of the region. It was amazing, as I expected. But my high expectations meant I came away with a few reservations.

First, the good stuff: there is lots of ground level retail, lots of restaurants etc, and lots of apartments above them, all arranged in a distinctive urban form. Public transport is abundant. The place is buzzing day and night, which means you want a quiet apartment facing the interior of the block.

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And it was the hollow interiors of the blocks of Eixample that were the site of my first disappointment. The cores are all built over.

Our apartment had a balcony facing the interior of the donut. It was nice and quiet, but rather than a green space below, we looked down on a bunch of roofs. The ground floor retail has been so successful they have basically all built out to the very back of their blocks, leaving very little open space inside the donut at ground level.

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There are one or two exceptions to this rule in the Eixample district –  I saw one tunnel leading through to a children’s playground. But Google Maps shows the interiors of the octagons mostly all built over.

The problem is compounded by the near total absence of open space in the district. Regular readers of this blog will know that I am no knee-jerk admirer of open space. But just as I think Melbourne can sometimes go too far in one direction, Barcelona goes too far in the other.

All those blocks, and none left open as a Plaça? Nowhere to sit and take your espresso without traffic whizzing by? The lessons of old Europe were not applied!

This becomes all the sadder when you look at the original plan for Eixample. (Eixample, which I found out is not pronounced remotely like the word example, means expansion. It was designed as a contrast to the higgledy piggledy old town of Barcelona.) The original plan shows not only were plaças dotted around, but the octagonal blocks were intended to be developed on only two or three sides.

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Developer interests have been making a mockery of density intentions for a long time.

One thing that has been preserved from the above map is the octagonal blocks. In contrast to the square corners of grids like Manhattan’s or Melbourne’s these mean the intersections have an open feel. Sounds great, right? And it is great, for drivers.

That open space is mostly devoted to road.

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They use some of the extra space for parking, some for huge dumpsters and some to make the footpaths slightly wider, but cars can still zoom around the corners. It reminded me of the lesson of the “sneckdown” – a lot of road space is often allocated to cars that they don’t necessarily need. You can actually see a colour differential on the road above where traffic rarely treads. That space could be better used.

The following picture shows a fairly typical scene at an Eixample intersection – crowded with vehicles.

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The octagonal design also means pedestrian crossings are shifted back up the street. To cross the road, pedestrians must divert from the shortest distance between two points.

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Walk far enough like this and you become a huge fan of squares.

The blocks are reasonably short, so if you’re walking a long way, that’s a lot of meandering. Some people don’t bother diverting to take the lights, and just wander out across the expanse of road instead. The pedestrian crossing placements mean the two at each corner are not adjacent, so if you just miss one light, you have to walk back across the chamfered corner to get to the other one. A small pain point, to be sure, but a real one when it is repeated so often.

In summary, the Eixample district charmed me, but was somewhat more car-focused than I’d expected.

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Motorbikes: everywhere. This street was traffic calmed, actually.

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The streets are also all one way, with no parking, which I find raises vehicle speeds.

Eixample is an expensive and desirable part of Barcelona. You can get some pretty fancy smashed avocado there, which says a lot. The part of the old town called El Raval, meanwhile, remains amazingly rough and ready.

So, Eixample was very easy and enjoyable to live in, but not quite the urban design paradise I’d imagined.  And in fact, some of the problems I’ve mentioned are currently being reviewed.

Have you been to Eixample? Any thoughts on its advantages and disadvantages? Leave a comment below!

Can we ever get road user charging to work?

PART 1 – WHY ROAD PRICING ISN’T WORKING

I’m an economist – I think I understand markets and am tempted to use them when they can do a good job.  Road user charging would do a good job of keeping people off roads at peak times and, used properly, could kill traffic congestion.

I’m reluctant to endorse road-building sprees before we even try to manage the use of the infrastructure we have. Taking, say, the least useful 10 per cent of traffic off roads could kill congestion for a while and mean we can wait another few years before making huge billion dollar infrastructure investments. That has big value to society.

(A small drop in traffic can make a big difference: While slow but steady traffic can be efficient, there is a tipping point where congestion is too high, the system overloads and it fails. At that point the effect of another road user joining the road is negative sum. We really want to be below that point. Also, a surprising share of trips are ones that could be moved around – less than a fifth of trips are commutes.)

However. Road user charging has serious problems. The big one is fairness.

Charging people to use existing roads is seen as unfair – and what’s worse, it probably is. (Perhaps not the most unfair policy in all of the Australian history but enough to pose an insurmountable political challenge to implementation.)

Yes: we charge for food, we charge for electricity, we charge for water, and nobody would deny those are more fundamental. But roads are different in a key way.

The big factor is that a group of people who are below and around the average wage consume a lot of road time, and they do so in ways they can’t avoid. Remember, most jobs are in the suburbs, which are not well served by public transport.

(This is not to deny Joe Hockey’s ‘controversial’ point that the very poorest people own cars less and drive less. He is right. I’m kind of displeased with this ABC fact-check that rates the comment misleading. It’s plainly fricking true, and he was pointing it out in the service of raising the petrol excise, which is good policy. n.b. All this is not to deny that Joe Hockey was a bad Treasurer. Also, he blocked me on Twitter for making a joke about the aforementioned debacle. The joke, shown below, is totally innocuous.)

Alack, I digress. The key point is that less well off people live further out and consume a lot of road time, so road user charging is seen as pure sadism. I wrote about it recently at Crikey and a commenter asked why I wanted to “penalise” people. I read the comments on these sort of pieces a lot and I very often see charging for roads described as a penalty or punishment.

If your policy solution is perceived as cruel, you have a big problem. I’ve written previously about a PR strategy for congestion charging (and gee it’s a good one) but I’m still not seeing much progress for the idea. Maybe, just maybe, we need more.

2. BREAKING IT DOWN

My Crikey piece tried to sort through the ways in which a market mechanism works to sort out why the market is seen as unfair.

A market mechanism rations demand, yes – and encourages supply too. It also incentivises suppliers to be efficient; tempts competitors who may do a better job to enter the market; encourages people to consume things that are cheaper; and also, reveals who wants or needs something most.

Well, it does that last one in theory. In reality, the buyer is not always the person who wants the thing most in any sort of objective sense. Budget constraints are the deciding factor: Rich people can afford lots of things while poorer people have to make a lot of tough decisions.

Of course, it is not just roads. Many consumer goods go to rich people even though poorer people would get more subjective value from them. This, we implicitly say in a capitalist world, is fine because the reason the system works at all is by rewarding the people doing the highest value work with a life of being able to afford more things and facing fewer tough trade-offs. (this implicit choice is an issue for another time.)

But work is not something we consume like other goods. Getting to work is not a reward for work, it is an input. If you make getting to work more expensive, you risk putting some people off going altogether.

If there is literally no other option for how to get to work, and no way to bargain with your boss for another start time, and you don’t think you can find another job, and all the more fuel efficient cars cost more than your current car would fetch second hand, then the effect of a higher road use charge is 100% income effect / 0% substitution effect and you can see why it might seem punitive.

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When household budgets are tight due to child care and high effective marginal tax rates, a road user charge might actually prevent a person from commuting. If we dissuade someone from working now, it can not hurt them only now, but damage their lifetime earnings, and the lives of the generations that follow them.

Even if most people are not at these extreme cases, the trade-offs that a road pricing mechanism forces are difficult ones over things that already seem hard.

So you can make a good case for a road rationing mechanism that tries to ration road use without putting a cash price on roads. I have previously proposed a system that might do that.

A recent article in The New York Times describes a food donation network that used a kind of pricing mechanism to solve an allocation problem. It created a big range of efficiencies via a points system — local food banks used points to bid for various items from each other.

A similar points system could overcome the fairness problem in pricing roads. People could be allocated points based on, for example, how far from the CBD they live, or their lack of access to public transport. Unwanted points could be sold off.

This system would totally eliminate congestion if few enough points were given out. It would also create incentives to use other kinds of transport. And it would do so fairly.

What it doesn’t do is reward the owners or operators of roads, or provide a funding stream for roads. Public provision and funding would still be necessary.

But perhaps waiting for the perfect market mechanism that can deliver all the potential upsides is unrealistic. Can road pricing advocates choose not to let the perfect be the enemy of the good?

The more I think about this, the more I see the devil is in the detail. Who would get the points?

This goes to another of the points I made in the Crikey piece. Market allocations of goods may not be fair, per se, but they are a sort of Schelling point – a way of allocating scarce resources that society generally tends to land on in lieu of other ideas.

I like the idea of giving them to households with worse public transport options or lower access to jobs. “I have no other options” is one of the big reasons road user charging is seen as unfair. Having no other transport options is also sometimes a proxy for socio-economic deprivation, although an imperfect one.

But an allocation based on geography would be tough for any government to operate without causing a fuss and furore that would see them voted out.

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While society doesn’t agree to market distribution of road space, yet, that doesn’t mean it agrees to some other rationing plan either. We have a few non-market rationing models in place in other parts of the economy: Income testing and asset testing are both known ways of allocating scarce, government-provided goods. Neither is an obvious fit for allocating road space.

So a geography-based allocation model would be wholly new. And in our geography-based political system, very much open for abuse. New allocations of road use credits would not be safe from the electoral cycle, although whether congestion would rise to previous levels is not clear.

We should also consider the unintended consequences of such a system. Would it reward sprawl if you gave road access credits to people with low public transport access? And punish people who’ve bothered to make the trade-offs to live in smaller spaces closer in?

The whole thing starts to look very difficult indeed. Is there another way to make a non-market rationing system work? Please leave your ideas below!

How the media gets things wrong. A mea culpa

The other day, I encountered a report from ABC’s Radio National that just didn’t look right to me.

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That claim, that expense entitlements are costing taxpayers more than half a billion dollars a year? I was pretty sure that wasn’t strictly accurate.

I’d looked into this myself. For an article for Crikey, back in 2015.

Here’s the headline on that article. See if you can spot the problem.

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That’s right. My article seems to be making the exact same claim as the Radio National piece.

I remember writing the article. I knew I had some interesting information – that the total cost of running all our MPs was $500 million a year, and that was a substantial multiple of their salary costs. The implication was that there was some fat in the system.

I didn’t know exactly what share of the $500 million was “entitlements” and what was other things, because the categories are partly bundled together. I didn’t claim all the $500 million was for entitlements. It definitely includes some things most people wouldn’t deem “entitlements”, notably MP salaries. I guess I could have been a lot more explicit on that fact.

Here’s what I wrote.

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Whatever interpretation readers might be left with after reading, I don’t know, but the headline above was put on the article. The headline turned out to be very powerful online and the piece was widely shared.

Including by this guy.

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(If you don’t recognise Paul Barry, he is the anchor of an Australian TV show called Media Watch, dedicated to keeping the media on the straight and narrow.)

The factlet embodied in the headline has apparently since become accepted truth. (Even though it isn’t strictly speaking, a fact). I’m pretty sure this is what the Radio National reporter drew on for the report above, although perhaps indirectly, as it seems to have been repeated in various places since.

I feel guilty. I actually remember looking at the headline at the time, and thinking  “that’s not quite right.” But I did not ask for the headline to be altered, using the bad faith justification of “people will read the article and know the truth, rather than relying on the headline.”

I suspect I’m not alone in having a slightly guilty feeling about some of the headlines that have accompanied some of my stories. In the modern environment, headlines play a role far greater than simply summarising the content, and that creates a tension.

I’ve sent an email to my pals at Crikey asking if we can get the headline changed. It’s obviously pretty late for that, but it might make me feel slightly better at least.

I asked the general public to contribute their ideas about Australia’s productivity challenges. You won’t believe what happened next.

The following is a submission I made to the Productivity Commission’s big new review of productivity.

Productivity is normally addressed top-down. Concepts are defined in the abstract and the debate proceeds from theory to practice.

I wanted to test inverting that approach. Could a wider than normal group could be made interested in the conduct and outcomes of this productivity review? And would they have much to offer?

On Wednesday 7 December 2016 I had published an article at news.com.au, entitled “What’s the stupid, inefficient thing that makes you mad?” It introduced the concept of productivity and the Productivity Commission’s rolling five-year review process. It then called for readers to contribute examples of inefficiencies in the Australian economy they’d like to see eliminated.

The responses were many (over 400 responses in various online forums) and diverse. (The most frequently mentioned was to get rid of politicians, which was amusing at first but paled somewhat upon repetition.) Nevertheless, the process turned up a large number of illuminating suggestions. I don’t propose to repeat them all here, but certain topics kept coming up in ways that suggested a pattern.

1. Centrelink. Few had anything nice to say about the administration of the government’s welfare services.
2. Australia Post. Delivery services were pretty much uniformly reviled.
3. Transport issues. The dispersed wisdom of the crowd has developed some suggestions for traffic flow that seem clever.
4. Duplication of levels of government. Not popular.

Notably, most of these relate to user-facing regulated entities. The ATO, Medicare and various license-issuing entities also came in for criticism. That represents a clue that for many Australians, an obvious location for productivity improvements might be in the non-market and quasi-market parts of the economy where productivity is hardest to measure.

I discuss each of the topics below.

1. CENTRELINK

“I waited twenty minutes for a duplicate form to be printed – that does not include the time to line up to be told the form they sent was incorrect so I needed a new one. I’m sorry but if any business was run the way centerlink is they would go broke in under a week.”
-Rachael Harvey

All organisations rely on the time and effort of their clients. When you shop for something you may have to learn about their offerings, attend their premises, wait in line and go through check-out processes. This is generally appropriate and efficient.

A problem only develops when the marginal value of the client’s time is higher than the marginal value of the provider’s time. In a free market scenario, this problem can be rectified via the entry of a competitor providing a better service.

In a government scenario, entry is not possible and so knowing how much client time and effort to demand is a challenge.

The results of this informal survey suggest the performance of Centrelink is considerably below that of a large, regulated private entity. Centrelink was mentioned approximately 30 times, banks only three times, Telstra once.

“I had to wait 1hr40 mins just to change my income amount ! This is not fun !! I actually have work to do but still have to wait a minimum 1 hr to talk to someone.”
– Jenni Pin

“Centrelink phone calls and waiting times the fact that you have to go in there 100 times before they sort out the issue”
– Beth McDonald

I have personally led a very fortunate life that has meant I never crossed paths with a Centrelink office. I suspect the same is true for many public representatives. This risks creating an out-of-sight, out-of-mind situation. Policy-makers doubtless prefer to consider the value of welfare payments and their targeting rather than the administration that delivers those payments to the targeted populations. Furthermore, it is easy to imagine that the people navigating the tortuous administrative processes are undeserving of better service.

Indeed, making the use of Centrelink services extremely inconvenient can serve a policy purpose if it deters over-use of welfare. But while the deterrent effect applies only at the margin, the burden of poor administration falls upon a wider group.

Unwieldy administration is likely to have the most material effect on deeply disadvantaged people for whom Centrelink services are vital. In many such cases, the person dealing with the challenges of administration is likely to be a relative or case-worker doing so on behalf of the beneficiary. These people have other responsibilities and the productivity advantages of lightening their workload is obvious.

“You ring to notify them of changes, spend hours on hold, use all your credit so you go to the office and get told to go use the phones and ring through… Why in the hell can’t you just sit with someone and say hey “I’ve got a job, yay me! Can you change my file accordingly please”? It takes 10 minutes!”
– Shylah Mundy

“I thought I had a miracle yesterday it only took seven, yes seven minutes to get hold of someone on the phone with Centrelink “
– Aaron Cosier

Spending public money to save the time of private citizens is considered an investment in the case of expenditure on public assets like roads. In the case of Centrelink administration it is accounted for as a recurring expenditure. This creates a categorical distinction that may be an impediment to raising Australia’s productivity performance.

Productivity enhancing reform for Centrelink might therefore require more measurement of customer satisfaction, better benchmarking to best practice, and balancing the marginal cost of public financial inputs with that of private time inputs.

2. AUSTRALIA POST

“We’ve caught posties just putting cards in the letter box without even coming to the door.”
– Paige Wiles

Australia Post, like Centrelink, relies on making demands on customers’ time to conserve its own resources. The practice of dropping off a card that announces the presence of a parcel – in lieu of attempting to deliver the parcel – is now infamous Australia-wide.

“Never get a card or notification, i just have to regularly go to the post office and check.”
-Nick Seam

This is a simple example of KPIs being ill-defined and incentives poorly implemented. Australia Post faces competition in parcel delivery and in theory, market forces should sweep the problem away.

Australia Post can get away with not demanding higher performance from its contractors because of cost advantages associated with the legacy letters monopoly, and its lack of downside risk – it knows it won’t go broke. This suggests even corporatised government-owned entities can fail to perform optimally and may be a place where productivity enhancements can be found.

3. TRANSPORT

The “obvious” solution to Australia’s transport problems is road user charging. Among the policy-making class at least. There is, however, no indication such a policy is yet obvious to most Australians. It was not mentioned once in several hundred replies to the above-mentioned article. Of course, there is some marginal benefit in another government-funded .pdf recommending the idea. A journey of a million miles must start with a single step, etc, etc.

But in the absence of a charismatic political leader committed to market-based solutions (and what an absence it is proving to be) permitting such a politically challenging policy proposition to crowd out other proposals might be unwise. In that case, the following suggestions from the comments section may be useful.

“In the US you can turn right on a red light which would[be] left on red here! Makes so much sense“
– Jade of Vic

In the domain of transport, time costs are often traded against safety. Uniform, unbendable rules contribute to a strong understanding of the law and so help ensure the law is followed.

But there remain ways in which transport administrations use the time of travellers to achieve their goals without perhaps placing enough value on that time.

“Waiting at traffic lights in the middle of the night when there are no cars around.”
– Athan Pittakis

Optimal access to public transport is one. The placement of entrances to stops and stations is rarely optimised. While transport operators aim to minimise travel time once passengers are aboard, they rarely consider the entirety of the passenger journey. This may especially be the case where rail services are provided by private operators but stations are owned and operated by government.

“Racing to catch the train and you have to run the entire length of a car park then half a station to the entrance. Or having to walk back through the length of a car park in the dark at night.”
-Peita Orlowski

4.DUPLICATION OF LEVELS OF GOVERNMENT

If Australians learn to be upset about their interactions with public entities, they will tend to become more upset as the entities, and so the interactions, multiply in number. This may explain the general sense expressed that collapsing Australia’s levels of government to a number less than three would yield advantages.

“Get rid of local Councils. They are petty, bureaucratic wastes. Full of pen pushers and people who have nothing better to do then lord it over the communities they are supposed to serve.”
– Therese Theil

The legacy of Australia’s federation has complex interactions with Australia’s productivity performance. While overlapping administrations create potentially wasteful static effects, competition between states and the possibility of experimentation create the potential for beneficial dynamic effects.

“Instead of three levels of government, how about just two. The federal govt can look after defence, health, education, anything that affects the country as a whole, and local councils can look after local issues. Less politicians, less duplication, less waste.”
– David Lewis

It may be possible to obtain some of the benefit of both if policy parameters can be varied while user-facing elements can be standardised. For example, national registers of licenses could be made compatible with different license requirements.

CONCLUSION

The productivity-enhancing reforms of Australia’s past have focused on the private sector. Micro-economic reform of the 1980s was a powerful enabler of prosperity.

However, much low-hanging fruit has been harvested in this field. The best options that remain are land tax (aka taxing grandma’s house) and road user charging (aka taxing people’s drive to work). It would be fair to expect that several five yearly reviews will pass before those two policies garner bipartisan support.

The responses collected in this process indicate that people are keen for better quality public service provision. They want it to be more efficient and more respectful of their time. Assuming for a moment that people know what they want, the question then arises of how to do so.

Reforming the delivery of public services faces a different set of challenges -conceptual, measurement challenges and political ones too. The political challenges only multiply if approaches that rely on outsourcing and competition are applied in popular public domains (see: “Mediscare”). In some cases, more competition will be the answer. In other domains, an alternative approach, and one worth contemplating, might be to design and fund the public delivery of higher-quality services.

House price omens

UPDATE DECEMBER 2016:

This post is miles off! It was all predicated on the numbers coming out of the ABS. What  I didn’t realise was the extent to which they would be revised. Because sales of dwellings are reported late, the data get revised up. Generally 3 months afterward.

So. Here we are three months later and I can tell you the number of houses sold in the 3 months to June 2016 got revised up by 26 per cent. The scary looking charts below represent missing data.  Sales have barely trended down at all.

I leave the post below for the sake of completeness.

When it comes to house prices, people usually just focus on the average price for sales in the last period. But a market is about more than just prices.

It is also about sales volume. And luckily, there is lots of detail in today’s official data on volume.

The market has suddenly turned skinny. Not so many homes are trading hands compared to recent history.

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That is a pretty steep drop, and when you break down the data you find that it is mostly centred on detached houses (as opposed to attached dwellings, which include units, flats and terrace homes.)

The fall in sales is concentrated mostly in Melbourne and Sydney, but also Brisbane.

screen-shot-2016-09-20-at-12-28-23-pm

Now, there are reasons to not trust the newest, lowest datapoint. It will get revised upward as real estate agents hand in their data to the ABS. (Update in December: In retrospect this paragraph is the best part of the whole post.) Last year’s June quarter was revised up almost 50 per cent! If that happens again the results look less dramatic. But the fall is not all about the latest data point – it looks to have been going on since the start of the year.

If the apparent trend survives, this looks like a serious shift we should pay attention to.

The question is whether this information has any value. My quick analysis suggests it just might.

In previous times, plunges in the volume of houses sold have indicated the start of periods where prices faded away. The yellow periods in this graph go from the start of a fall in volumes traded to the end of the slide in median house price. You can see a house trading volume fall can mark a period of house price stagnation.

screen-shot-2016-09-20-at-12-17-41-pm

For another look at those yellow periods, here’s the RBA’s housing prices graph. 2008 was a shorter sharper dip and mid 2011 was a longer one.

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Might we be about to see the lines head back below zero? And if so, how far below zero will they go?

Gun advocates: say what you mean, and mean what you say.

Originally published in the Australian Financial Review, December 2012 after the shooting at Sandy Hook Elementary School, which killed 27, including 20 children.

Following the school shooting in Newtown, Connecticut, there have been lengthy screeds arguing for more gun control legislation in the United States.

In response, the comment feeds and Twitter streams parrot one idea above all others: “If guns are outlawed, only outlaws will have guns.”

When I first saw this phrase, it rocked me back on my heels. It’s a strong argument, immediately powerful. It took me a long time to see it for what it is. Flourish.

Screen Shot 2016-06-30 at 1.28.50 PM.png
The original. I like it, but not the headline an anonymous subeditor put on it!

It invites one to think of a world where the law-abiding are defenceless. It suggests that arming the law-abiding inhibits crime. There is little or no evidence this is true. 

The reason it is so hard to see the emptiness of this phrase at first blush is, I reckon,

its structure. It’s what’s called an “antimetabole” – a symmetrical phrase that has been a rhetorical device since humans first began to write. The second clause is a mirror image of the first.

It has a peculiar effect on the human brain, short-circuiting reason and going straight to deep reserves of feeling.

Antimetabole is the device of choice for some of the best-known leaders of all time.

“Ask not what your country can do for you, but what you can do for your country.”

– John F. Kennedy, 1961.

“It is not even the beginning of the end but is, perhaps, the end of the beginning.”

– Winston Churchill, 1942.

“People the world over have always been more impressed by the power of our example than by the example of our power.”

– Bill Clinton, 2008.

“The first will be last and the last will be first.”

– Jesus of Nazareth, circa 0 AD.

But if they pay speechwriters well, the device is also available to lesser lights.

“In politics there are some candidates who use change to promote their careers, and then there are those, like John McCain, who use their careers to promote change.”

– Sarah Palin, 2008.

An antimetabole is an example of a chiasmus – a broader grouping of phrases that have “symmetry”.

These go back to ancient Greek writings: the word chiasmus comes from the Greek word for the letter X. Imagine two arrows crossing as they depict the structure of the second clause reversing the order of the first.

For example:

“In peace sons bury their fathers, but in war fathers bury their sons,”

– Croesus, circa 600 BC.

Australian politicians, operating in an environment deeply suspicious of rhetorical flourish, aren’t big users of the chiasmus, but there are Aussies deploying the antimetabole structure for their own ends.

Christos Tsiolkas, author of the best-selling novel The Slap, cites his authenticity using antimetabole: “You can take the boy out of the suburbs but you can’t necessarily take the suburbs out of the boy.”

What does this really mean? It doesn’t matter. In the work of persuasion, little lifting is done by logic. In fact, logic needs a little lifting. (See what I did there?).

Like an MC Escher painting, an antimetabole can join up concepts we wouldn’t normally be open to connecting.

Psychology professor James Williams in his 2002 book Visions and Revisions argues that antimetaboles fit right into the grooves of our thought patterns.

“Given what we know about the mind, it would be weird in the extreme if antimetabole were not legion,” he argues.

The human mind is apt to conflate beauty with truth. When Watson and Crick finally lit upon the idea of the double helix structure for DNA in 1953, Watson knew they had the answer to their riddle. The double helix was too beautiful not to be true, he argued.

Pop culture loves the antimetabole. It can be found on internet fan sites about washed up martial artists: “Chuck Norris doesn’t dodge bullets, bullets dodge Chuck Norris.

Football coaches rev up an inferior team with it: “A champion team will always beat a team of champions.”

Schmucks use it making small talk in the lift “Working hard, or hardly working?

But as fun as antimetabole might be in everyday life, we ought to be suspicious of it as part of persuasion. Fair is foul and foul is fair, when it comes to political communication. Antimetabole is part of the fog and filthy air.