Friday, September 30, 2011

Perspective and Gas Prices

A couple of days ago the AP published an article on lower gas prices.  The price has dropped significantly since summer and some people were amazed and thrilled to find prices below $3 a gallon.  If things go well some parts of the country could see prices as low as $2.50 in the near future (or not).

What does this have to do with perspective?  To me it’s a reverse example.  Here we have people very happy with prices below $3 and possibly headed toward $2.50, whereas not too long ago we were hearing cries of pain and anguish at prices as high as $2.50, but compared to $4.00 it seems like a bargain.  People tend to have short memories and get used to things as they are, reacting with some discomfort to changes.  In this example it is joy rather than discomfort, but because we have experienced such economic and technological growth and improvements throughout our lives, our expectations are set and any loss or reduction causes discomfort.

Perspective should remind us that how things are today is not the way they always were.  Gas was not always three or four dollars a gallon, but televisions were not always digital, with 50-inch screens, surround sound, 200 channels, or even in color (and we had to get out of our chair to change the channels).  Less than one hundred years ago most Americans had to live without radios, a second car, a washing machine, a vacuum cleaner, in-door plumbing, Social Security or any expected retirement, Medicare or any health insurance.  More recently people got along fine without home computers, dishwashers, (4G) cell phones, moon roofs, garage door openers and home air conditioning.  But it’s easy to take these things for granted and feel we could not live without them, when, in fact, people lived for many centuries without them.  It’s easy to understand how Greek citizens can march in protest over loss of benefits while their country teeters on the edge of bankruptcy.

Perspective is about values, values that keep our wants from morphing into needs, values that remind us what is vital vs what we can really live without.  It’s nice to see the price of gas turn around, but it should also remind us to be grateful for what we have and to consult our core values when we decide how to spend the extra cash.  Martin Luther King, Jr. put it very bluntly in his 1964 lecture at the Nobel Peace Prize ceremonies:  “Yet, in spite of these spectacular strides in science and technology, and still unlimited ones to come, something basic is missing. There is a sort of poverty of the spirit which stands in glaring contrast to our scientific and technological abundance. The richer we have become materially, the poorer we have become morally and spiritually.”  I think he was talking, in part, about perspective and wonder if we have been progressing or declining since then.

Monday, September 26, 2011

Behavior has Consequences

As I reconsider my main topic, that behavior has consequences, I ask myself how anyone could disagree.  Hasn’t this been the message since our youth from parents and teachers, hard work will be rewarded and laxness penalized?  The ancient wisdom of the Yoga Sutra states in part that the consequences of an action will be either painful or beneficial (2.14) and that results of actions will be either immediate or delayed (3.22).

It seems that the opposite viewpoint would be very fatalistic, that no matter what you do, say or decide, your fate is sealed.  You are not rich or famous or popular or successful or happy because you were not destined to be.  It’s not what you do or say that makes a difference, it’s what other people decide.  That is giving up, not taking responsibility.  True, Americans often rely on prayer to assist in their decisions, but they typically pray for help in making a decision or being successful in their actions.  Talking to God helps them sort things out, may help put things into perspective, reminds them of options, or helps them keep the courage to cope when things go wrong.  When something is out of control they put it in the hands of God, but usually only after they have done everything they can think of.  That's not the same as giving up and their action or inaction that comes after praying will also have consequences.

To follow what I am presenting each week requires acceptance of this basic belief that what we do matters.  Bad things do happen to good people and good things to bad people.  This tends to challenge our faith.  On the other hand, good things happen to good people and bad things to bad people, but without the apparent irony this fact gets little attention.  In general, better decisions result in better outcomes.  Luck does enter into it, but there is truth in the saying that you make your own luck.

That’s why I am adamant about the information presented here.  I continue to see examples of opportunities for better decisions, and hence better outcomes, in the key dimensions.  I also see examples of powerful or influential people who really do believe that a sizable proportion of the population is at the mercy of forces beyond their control.  To overcome this is a double challenge:  taking control of our lives away from those (self-righteous) helpers while simultaneously making better decisions in face of the challenges presented by an increasingly technological society.  It’s our only way out.

Whenever people ask the question, “What’s wrong with America today?” my simple answer is this:  Our behavior is not consistently strong enough in the areas of Discipline, Responsibility, Economic Understanding, Critical Thinking and Perspective to deserve better outcomes.  I see evidence everyday and share it with you twice a week with the hope that more and more people will begin to find behavioral solutions to our societal problems instead of relying on the traditional view and trying to fix the problems by working on the symptoms.

Friday, September 23, 2011

Perspective: Penny-wise, Pound-foolish

I have some recent (behavioral) evidence that many corporate executives are skimping on IT resources in the short term, risking eventual loss of business or higher costs over time.  This certainly falls in the category of perspective.

Today I picked up the mail and opened an envelope from my doctor’s office.  It was a bill for zero dollars.  It told me what I already knew, that I didn’t owe them any more money for my recent visit, but costing them for the printing, the postage and the enclosed return envelope that I didn’t’ need.

Earlier in the day I received 3 identical e-mails from my broker telling me that my profile had changed.  (I changed from my current listed bank to the one that sends me two identical e-mails at the same time every month reminding me to balance my checkbook.)  The brokerage is very careful in these cases and sends two small test deposits to the new bank.  I looked at the bank website and found the two deposits in my checking account.  So far, so good.  Then I returned to the brokerage site to confirm and was told to come back in a couple days after they made the deposits.  Apparently they were not yet aware that the deposits were made.  Somebody’s programs are not talking to each other.

The reason for the above change is that I am ending my relationship with the bank that was originally listed with the broker.  At this bank every time I come in and they look up my account and say, “I just signed you up for next quarter’s bonus points!” – like they are starting off by doing me a big favor.  Then I tell them that I already signed up and wonder why their PC doesn’t indicate it.  If they said, “I see you are already signed up,” at least I would think they are on the ball, however, when I checked later at home, it is very difficult to get that information, so they just sign me up whenever I talk to them.  (This, by the way, is the credit card that I was issued two of and just got one cancelled when I received a solicitation for another identical one in the mail – another case of programs not communicating.)  But I digress.  The reason I went to the bank was to transfer out my IRA and, not wanting any trouble from the IRS, I specifically asked for a check made out to the new bank showing me as FBO (for the benefit of).  They told me that their computer wouldn’t do that without a transfer request from the receiving bank, which would take longer than the 10-day grace period.  (And they wonder why I’m changing banks!)  So I have a rollover instead of a transfer, which means that each bank (or each bank’s computer) must send me an additional tax form.

Finally, in the process of checking on the bonus-points question, I noticed that the department store where I ordered a wedding present on line is about to bill me twice, once on the day I submitted the order and again on the day they shipped it. 

I hope all these companies are saving a bundle from off-shoring, because they are losing a lot of goodwill by this display of incompetence to their customers.

Monday, September 19, 2011

Critical Thinking and Tricks with Numbers.

Sometimes we become lazy.  Politicians and news agencies will take advantage of this laziness in their use of statistics to reinforce their point of view.  There is a saying, "Figures don't lie, but liars can figure."  People collect and report all kinds of numbers for many purposes, sometimes purposely representing them in ways that favor or discourage a particular conclusion.

They talk about x% growth or y% losses or cite hard dollar numbers. You may not be given all of the facts.  Several techniques may be used to color the message.

If a company had a profit of $1 million this quarter up from $500,000 last quarter, but down from $2 million for the same quarter last year, a reporter can get sympathy for the company by talking about a 50% reduction (from last year). That could also mean a drop from $2 billion to $1 billion or from $10 to $5; we don't have all the facts.  If he wants to give the opposite impression, he says that profits doubled from last quarter or simply that they made $1million.  (A million dollars is still a lot of money in most people’s minds.)  When the media or politicians want to arouse anger against large companies they talk about profits in the billions without giving any perspective about relative costs or prior performance.  When companies report their own numbers they can use similar tricks to evoke the opposite reaction.

One of the worst abuses is to talk about a reduction in growth and call it a cut or a loss.  It may be less than someone expected, but it’s clearly not a cut.  To deliver a message of economic gloom, news reports state that the economy grew at a slower rate – but growth is still growth.  On the other hand, if they want us to feel encouraged, they emphasize the growth – same numbers, it's all in the presentation.

Another trick to make savings look bigger is to state it over a longer period - they'll spend today, but pay for it with reductions over the next ten years.  On the other hand, when someone wants you to spend or donate money they go the other way – "that's only pennies a day," but pennies a day can add up to over $300 a year.

When fundraisers want to make an impact they will tell you that someone dies of a particular disease every 6 minutes. That is much easier to identify with than 87,600 deaths per year.  People can get lost in the crowd thinking about numbers that big, and with 300 million people in the US, that's less than 3/100 of 1%, which paints not nearly as impressive a picture as one person dying every six minutes, a tactic clearly designed to get you to change some behavior or donate to the cause.

These tactics of packaging numbers are very common, which makes Critical Thinking crucial as both as a tool for getting at the truth and as a defensive weapon.

Friday, September 16, 2011

Another Look at Perspective

Earlier I defined Perspective, in part, as the ability to separate the important from the trivial, the substantial from the artificial, and as not professing one set of values and living differently.  When Americans talk about their values, what they hold dear, you often hear words like family, God or faith, freedom, America, education, friendship, compassion, courage, and providing a better life for their children and grandchildren.  I may have left a few out, but these are among admirable values, that they express.  We should expect to see decisions and actions that reflected these priorities.  Just last weekend on the 10th anniversary of 9-11 many of us remembered the tragedy and took time to consider and recommit ourselves to living according to these values.  That’s why, especially this week, it’s a little disappointing to see these two seemingly unrelated stories.

The first is a report showing the “fair market value of top-tier college football players” at over $100,000, arguing that the money is not shared equitably with the athletes.  Full scholarships don’t even cover all their costs and a majority of them are living below the poverty level.  (Imagine that!  College students living below the poverty level and graduating with tremendous debt - unheard of!)  Anyway I take no position on the report recommendations, but I do wonder how the “fair market value” of college athletes got to be six figures.  Is it possible that the rest of us, those who buy tickets, hats, and sweatshirts, and watch the advertising have determined that value by our actions?  We say we care about education, and people wring their hands and looks distressed when reports show that America lags the rest of the world in mathematics, science and engineering or when test scores continue to drop, but when it comes to real values, putting our money where our mouths are, the top-tier nerd is left to fend for himself (or herself) while the football or basketball player is courted by multiple coaches, each paid 25 or 30 times what the professors are paid. 

The next day in the news comes another example of people showing their real values by their actions and decisions.  Shoppers lined up Target stores and brought their website to its knees wanting to buy a special line of discount fashions and furniture by a big-name Italian designer.  Note that this is not just a few people; it’s hundreds lined up and thousands on the internet.  (Aren’t most people at work on Tuesday morning?)  It’s described as a “growing strategy by retailers to spur impulse buys by creating a sense of urgency” – gotta have that latest fashion.  Despite what we try to teach our kids about what is really important in life, we invest our time and money on what we look like and what people think of us .

So there we have the dilemma.  What are our real values, what we say they are or how we behave?  Did we leave a few things off our list like college football and wearing the latest fashions or is the whole list a fantasy?  Scary stuff.

Monday, September 12, 2011

Healthcare II - Innovation

Last time I discussed healthcare (August 25), I pointed out how unrealistic it is to expect to control the cost by working through the insurance system to make it affordable to all.  This may increase access, but it will do nothing to reduce costs.  In fact, the most likely outcome will be just the opposite.

A second obstacle to cost reduction is innovation.  Just yesterday a news item appeared about the use of the Stryker Navigation System to perform back surgery.  Not too many weeks earlier a television news item featured a similar medical success using computer-guided techniques to perform knee replacement.  It seems like every few weeks a story comes out about another medical breakthrough or new and more effective prescription drug.  We see these so often that we take them for granted and ask why the cost of medicine is rising so quickly.  We seem to want medical innovation to grow much faster than inflation but complain when costs do the same.

The problem is that we want 21st Century medicine at 1960s prices, but think about how many new techniques have saved how many thousands of lives over the past 50 years.  Some innovation should lead to lower costs, less time in recovery due to less invasive procedures, but much of this machinery (MRIs, lasers, computers, robots, etc.) is very expensive and not fully utilized.  It’s nice to have a fancy machine nearby, and all the hospitals want to advertise that they are a state-of-the-art facility, but this spreads the total cost across fewer patients.  (Note that the linked article is about a child in Merrillville, IN who preferred not to travel to Chicago, not 50 miles away!)  These dynamics, the ability to deliver top-notch care at our local hospital, come at a price, which is paid for by insurance or by the government, with no direct mechanism for consumers to make choices to get the innovators to slow down and figure out where the money is coming from.  They bill the hospitals or doctors who submit the bills to the insurance companies who inform us how much of it we owe.

With our seemingly insatiable appetite for better and better care and an insurance buffer between us and the provider, it’s no wonder the costs keep rising!  Healthcare cost is a complex problem and most of the aspects have never been adequately addressed.  Rather than leaving politicians to propose their one-dimensional solutions, we need a citizenry of Critical Thinkers to raise all these issues and push them toward resolution.  More on this later.

Friday, September 9, 2011

Discipline - Gratification Delay and Attention Span

Behavior does have consequences.  One reason everyone does not behave correctly all the time is that consequences are often delayed, sometimes far into the future.  This delay weakens the temporal link between cause and effect, reducing the direct threat and allowing us to “slide.”

The dimension of Discipline is all about this delay.  Solid decisions, for example saving money or sticking to a diet, lead to future security, health and happiness.  Doing the opposite leads to immediate good feelings but to future regrets.  Do we really have an obesity epidemic, or do we have a widespread pattern of poor habits in the dimension of Discipline?  Not long ago people saved for a car, a vacation or a down payment on a house.  To be in debt was considered a problem, even a disgrace.  Would there have been a Great Recession had people not been lured by the slick advertising?  It sounded too good to be true, and it was.  Don’t blame the banks; don’t blame the government.  So many were unwilling to delay gratification of living “the American dream” until they could actually afford it, that the system became overloaded.

In 1972 at Stanford University they conducted the famous marshmallow experiment, placing pre-school children in a room with one marshmallow and the promise of a second marshmallow only if they could wait until the researcher returned – in approximately 20 minutes.  About one-third of the children could delay gratification and win the second treat.  Follow-up studies showed that these same children went on to do better in school, get higher SAT scores and were more likely to succeed in life.  Are adults today doing any better than those four-year-olds?  Consider that today approximately the same percentage of adults are not overweight.

Closely related to this is the issue of attention span and how we seem incapable of amusing ourselves, relying on technology to provide the solution whether by streaming video, portable audio, or media sound bites.  Is our attention span slowly approaching that 140-character or less threshold?  How does this combination of short attention span and inability to delay gratification contribute to our choice of leaders?  When we find that our money in Washington continues to be spent on promises of unsustainable benefits by people who garner votes based on superficial qualifications (appearance, speaking ability and clever sound bytes), it gets back to individual problems in the dimension of Discipline.

Monday, September 5, 2011

Critical Thinking - Question, Question, Question

An article in the USA Weekend told of the importance for adults to understand math.  It included some good tips, but the last one addressing the relative value of a benefit increase (non-taxable) compared to a pay raise gave some very misleading information.  It said about a pay raise:  “The extra money is nice, but it could very well bump you into the next tax bracket, possibly leaving you with less money than you had before the raise.”

Here is the error (using Married Filing Jointly examples for simplicity).  Tax brackets are marginal, meaning they only apply to the amount of additional money you make not to the lower amount.  Above $16,750 tax tables go up in $50 income increments, but the corresponding taxes only go up by around 7-8 dollars, which is 15% of $50.  When the bracket changes, at $68,000, it begins to go up by 12-13 dollars, or 25% of $50.  But all the rest is still taxed at 15%.  There isn’t a big jump at the breakpoint.

This linked table also makes the point.  The first table, 2010 married fining jointly, shows 0-$16,750 taxed at 10% and the next line shows $1675, which is 10% of $16,750, plus the amount you made within the next bracket taxed at 15% and so on.  Except for a few rare and ridiculous situations like being at the very top of a bracket, say $67,990 per year and getting a $22 per year raise, it is virtually impossible to get a reasonable raise and end up with less after taxes.

Unfortunately, so few people really sit down and do their taxes, handing them off to a tax preparer or computer program, that it’s easy to understand how the author and editor of this piece missed the error.  That’s why we must continue to be vigilant, think for ourselves and ask for more details when blanket statements don’t seem to make sense.

Friday, September 2, 2011

Critical Thinking vs. Wishful Thinking

I took some road trips over the past few months driving through Michigan, Indiana, Iowa, Ohio, Illinois, Pennsylvania, New York, Massachusetts, Connecticut and New Hampshire.  As I watched the scenery on Interstates, State and County roads and local streets, it reminded me of an annual event in Michigan when the supporters of the can and bottle deposit law turn out on its anniversary to say how proud they are.  During my travels, though, I saw no evidence that any of the states I drove through was cleaner or more littered than Michigan.  Is there really a benefit to this law to offset the costs of implementation?  Do these proud supporters understand the government-imposed costs on business and indirectly on us for the machines, maintenance, utilities, manpower, and computer programing to administer this program, not to mention the inconvenience to consumers having to save up (uncrushed) the cans and bottles for return?

Admittedly, this is not a huge cost, but it is another symptom of weak critical thinking.  If this were such a great idea and accomplished more than adding costs and pushing dimes around in a circle, wouldn’t everyone be doing it?  They back the bill, not because it makes sense, but because it makes them feel good for doing something "green."  They are thinking with their hearts, not their heads, which would be OK, if they weren’t imposing their conclusions on the rest of us.  (It also implies that they regard their fellow citizens as slobs who will not recycle or even pick up after themselves without this added incentive.)

Many of our societal problems today likewise are created and persist due to this kind of squishy logic.  They can be solved, if citizens begin to demand some kind of evidence of a benefit rather than feel-good speeches.  Other disputes that fall into this category, requiring analysis rather than advocacy might include:  gun control (slogans rather than evidence on both side), the deterrent effect of capital punishment, the economic result of minimum wage laws, the effectiveness of a D.A.R.E. program in schools, the use of psychics to assist in solving crimes, the assumed benefits of ethic diversity in all situations, the efficacy of healing by therapeutic touch and many others.  How can Critical Thinking and application of social science research methods get us closer to making the right practical and economic decisions to avoid wasted time and resources instead of the constant bickering, name calling and sloganeering that currently dominate these issues?