Monday, December 31, 2012

Price Deception

We are deceived by a lot of things, by ourselves and by others, especially advertisers.  We are all familiar with the pricing scheme of marking items as $19.99 instead of $20 to make them seem like a bargain, even though many people, when asked, will describe the $19.99 shirt as a $20 shirt.  Consciously we are not fooled, but subconsciously it registers as a better deal.  Consider that  nine-tenths of a penny per gallon on the price of gasoline.

Surprisingly, the opposite strategy is also used.  When paying a higher price, we often believe we are buying better quality even when we are really getting substantially the same thing.  In prior postings I brought your attention to tests of (more expensive) organic foods showing that they are not nutritionally superior.  Recently we learned that family cars outperformed luxury cars in the new crash tests.  I have seen many Consumers Digest-type articles saying that ordinary moisturizers help your skin as well as the high-priced brands that claim to be superior.  Higher-priced brand name drugs continue to sell well against similar or even identical generics by virtue of perceived quality.  “When presented microwaved food from the frozen food section in the setting of a fine restaurant, most people never notice.”

I remembered some time ago seeing a story about wine judging.  Experts were asked to rate a certain group of wines.  Later, in what they thought was a different event, they were presented with the same wines.  The ratings of the same wines by the same judges came out completely different – no correlation whatsoever.  I couldn’t find that source, but was overwhelmed by similar stories.  One told of wine tasting experts fooled in general, recommending wines with expensive labels with eloquent descriptions of their superiority over the same wine poured out of an different bottle.  Experts also gave differing descriptions when served a white wine and the same wine with red food coloring added.  Others couldn’t tell if a wine was red or white when they drank them from black-colored glasses.

It’s not only the experts who are fooled.  “Expensive wine is like anything else that is expensive, the expectation it will taste better actually makes it taste better.”  This article gave even more examples.  HDTV clarity and cheese tasting elicited the same perceptive errors based on price.  A January 2008 study showed that adults rated the same wine as tasting better when it came from bottles labeled $45 than from ones labeled $5.

How would this apply to the art world?  Experts always want to tell us what to think and what is real art.  We often look at the work and scratch our heads.  Here is a comment from a friend who visited an exhibition of what was proclaimed to be a major contemporary British artist at the Aberdeen (Scotland) Art Museum.  “Imagine a giant empty exhibit hall with nearly-blank canvases, each about 7 feet square, or painted unevenly in reddish-orange oil. A life-size bronze casting of a rumpled sleeping bag.”  I'm sure most of us would be equally puzzled at the praise for such an exhibit, but in the art world there is so much hype, and it’s so easy for the experts to pompously fall back on the accusation that others "just don’t get it."  We buy that logic and that’s why we get what we get.  (For an amusing spoof on contemporary art check out a film called Untitled).)

The effects of high price and over-reliance on so-called experts apply in many other fields.  So before you buy something based on the name or the price, do the research.  Whether it’s food, art, drugs, wine, cosmetics or cars, more expensive is not necessarily better.  When all you have to go on is expert opinion rather than evidence, you are usually safe to trust your own taste.

Which brings us to the real topic for today – champagne.  It is, after all, New Year’s Eve.  In this case I have done the research for you, and guess what?  More expensive is not necessarily better.  As this British source says, “In a blind test that has thrilled the marketing departments of the major retailers and perturbed at least one of the grande marques, six wine experts gave a resounding vote of support to some of the less glamorous bottles.”  Here's a short, light-hearted video with the same conclusion. 

So buy what you like and save a little cash.  Happy Critical Thinking in the New Year, and Cheers!

Friday, December 28, 2012

Gun Violence

Let’s take a rational, critical thinking-based look at gun violence.  Interest groups and the news media avoid this by taking opinion polls and starting on-line petitions in the heat of the moment, when we are filled with wonder, outrage and grief.  This is clearly not the time to be making long-term policy decisions, but it’s a pattern nonetheless – a truck crashes on the beltway and new safety regulations arise; trains collide and requirements for expensive electronic monitors are passed.  Shootings spark new gun laws.  Within 100 days of the Benghazi attack, a Congressional Mandate calls for 1,000 additional marines for embassy security.  Sensational coverage of exceptional events drives knee-jerk reactions ahead of well-thought-out answers.

With the recent string of shootings in a Colorado theater, the Milwaukee Sikh temple, a Baltimore high school, and a NJ grocery store, along with the murder-suicide by an NFL player and the recent terrible tragedy in Connecticut, there is a new cry for legal solutions.  Some say that we need fewer guns in society; others argue for more.  Some endorse school patrols and/or secured and bulletproof doors and windows.  Others emphasize the mental-health aspect of the problem.  There is a cost to each of these proposals, but when even one life can be saved, no one talks about the cost or possible unanticipated consequences.

These shootings were the irrational acts of five people – 5 out of 300 million.  Is it possible to keep guns out of the hands of such people, any more than to keep explosives out of the hands of terrorists, drugs out of the hands of addicts, drunk drivers off the road or alcohol away from minors?  Would forcing them to stop and reload buy enough time for authorities (or others) to react?

An interesting slant on the issue came several months ago from “public health experts” who suggest we treat gun violence as a social disease, following the model used to reduce highway deaths.  Over many years the number of traffic deaths has decreased even as the number of vehicles on the road has increased thanks to better road design, safer guardrails, mandatory automobile safety equipment.  When you can’t count on correct behavior, set up conditions that minimize the risk.  Beyond promoting defensive driving, avoiding distractions and not driving under the influence, they also “engineered in” safety by modifying streets and requiring vehicles to have seatbelts, front airbags, side-impact airbags, and mandatory safety seats for children.  (Notice the progression, and more technology is proposed.)  Gone are the days of riding in the open bed of a pickup truck.  Parents would be charged with neglect.

Applying this concept to gun violence, how do you engineer in safety?  The article lists some ideas:  stricter requirements for firearms purchases (including private sales), better oversight of design flaws, smart guns that allow only the owner to fire them.  Still, these suggestions deal primarily with the guns and not the environment or people whose lives are at risk.  Similar to drivers licensing, gun ownership might require both a written and range test with periodic retests.  Similar to seatbelts and safety seat laws, they might require children to wear protective vests at school.  (The sale of bulletproof backpacks is already on the rise.)   Could parents someday be charged for sending their child to school without one?  Do we need the equivalent of air marshals randomly patrolling schools, malls, theaters and convenience stores?  Some states now require all-night convenience stores to have two people working or a bulletproof enclosure or a security guard or to conduct business by a pass-through trough.  

These possibilities may seem farfetched, but wouldn’t mandatory seatbelts and airbags have seemed strange to Henry Ford’s contemporaries?  Didn't the government surveillance in Orwell's 1984 or the wall-sized televisions screens in Fahrenheit 451 sound like pure science fiction only 50 years ago?  Today security cameras and huge, flat HDTVs are commonplace.  We tolerate screening at airports that would have been shouted down as an unnecessary delay and invasion only 15 years ago.   When the government and advocacy groups get going, we must be alert to their tendency to get carried away.  Just recently, for example, a group proposed mandatory double-trigger spray bottles for household cleaners because adults can't be trusted to move spray nozzles to the "off" position, and children might be hurt.

With every restriction we can think of, accidents still happen.  Consider the case of the woman who accidentally shot her husband instead of the skunk she was aiming at.  She used her own gun, which was legally registered.  He was sitting inside his house; so even under the craziest scenario may not have been wearing his bulletproof vest.

When motivated by good intentions in the face of extraordinary circumstances, the tendency to jump to regulatory solutions trumps calm consideration.  Remember, those responsible for recent tragedies were not concerned with laws.  In their irrational state, they could have done substantial damage with any weapon.  Success in regulating out of existence all aberrant behavior in any subject is highly unlikely.

In an economy so fragile (we are told) that raising taxes to the level of 12 years ago while cutting spending could spark another recession, we must consider the cost.  There are nearly 100,000 public schools in the US.  Pay and benefits for a couple of security guards at each could easily run $15 billion or more per year.  How many theaters and convenience stores (and places of worship) are there?  Who pays for all the bulletproof glass and other safeguards?  You know in the end we do.  And the argument that it’s worth it to save just one life is flawed.  (See Value of a Human Life.)

Advice to parents dealing with their children following the massacre in Newtown could apply to everyone:  Limit exposure to the news – the highly emotional, graphic and repetitive presentations in pursuit of ratings drives out perspective; Be honest in describing the situation; Emphasize that this was a rare event and that the world is still basically a safe place.  It’s time to calm down, step back, take a deep breath and start thinking about this critically.  There are good ideas floating around but some poor ones as well.  Regulators take their cue from the public.  We must get over our grief and start thinking clearly before endorsing proposals. 

Important questions to ask ourselves as we watch the regulatory train leave the station:  How effective will any change be in deterring these irrational characters?  What response, if any, makes sense in reaction to truly uncommon events?  What will be the overall cost in dollars and loss of freedom to the rest of us – could every trip outside the house eventually become the equivalent of boarding an airplane?  Are we ultimately trying to do the impossible, to "idiot-proof" the whole world through laws and restrictions so that no one ever gets hurt?  Have we reached a point where this is acceptable or even makes sense?

Monday, December 24, 2012

A Gift for You

Merry Christmas!  Whether you celebrate it or not, Christmas is still tomorrow, and I don’t think it’s offensive to wish everyone a good day tomorrow and every day.

I also hope the understanding spreads far and wide that behavior has consequences and that the only sure way to improve our outcomes in America is to improve the behavioral inputs in the five key dimensions.

To show my personal dedication to the cause, I am offering each of my readers a Christmas present.  It’s important to good critical thinking that we not be tricked by all the statistical reference in the news and advertising and that we not spend our money where the probability of return is low.  Accordingly, I have attached a link to a free, PDF copy of my book, Statistics: Short and Simple.

Several years ago after teaching night classes to business majors, watching them struggle and psyche themselves out, I wrote this very short explanation – all you need to know about statistics without having to do a single calculation.  The math can be done by any spreadsheet application.  It’s knowing what to do, why you are doing it, and what to do with the answer that’s really important.

So download and enjoy!  Send a copy to your friends!  I know a statistics book was probably not on your wish list, but some of the best gifts are the ones you don’t anticipate.  Besides, think of all the royalties I am foregoing by giving it away for free! 

Thank you all and Merry Christmas.

Friday, December 21, 2012

A Different Look at Discipline

Discipline is the dimension associated with doing the right thing, even though it may take a little extra time or effort rather than taking short cuts, the path of least resistance or the easy way out.

Many things in life are simple to understand but hard to do.  They require discipline to avoid problems like obesity, smoking, insufficient savings for college and retirement, gambling, alcohol or drug abuse or “addictions” to videogames and smartphones.  Everyone knows that as a society we should be eating less and exercising more and, in general taking better care of ourselves physically, emotionally and financially.  The consequences of obesity, smoking and the rest are well understood and well publicized.  Nevertheless, problems persist and in some cases are worsening.  This is most often the consequences of a failure in discipline.

These are not the only symptoms of an America weak in discipline.  Here is a picture that was sent to me a couple of weeks ago of a car parked near a strip mall.  There were at least 7 empty and legal parking spaces near the car.  Instead the driver chose to park illegally on the striped lines, perhaps 10 feet closer to the store (but he was only going in for a minute – or some other excuse).  Behavior like this has no immediate or long-term consequences; it just shows a general disregard for rules that were set up to keep our society running smoothly.  It was a little too much trouble to park legally and walk the extra short distance, but I’d be willing to bet that the driver could have benefited from the exercise.

How about those people who abandon their shopping carts in the parking lot less than 15 or 20 steps from the collection area, blocking a space for someone arriving later?  This is another example of behavior with no direct consequences, but showing a weakness in discipline that likely carries over to other situations and contributes to our belief that America is heading in the wrong direction.  How do we solve the big problems if we can't even behave properly in small areas?

Should it surprise us then that a survey of 23,000 high school students shows that more than half admit to cheating on a test and lying to a teacher about something significant?  Where would they get the idea that taking the easy way out was acceptable?  Ironically the authors of the survey saw it as a good sign that the percentage dropped for the first time in a decade and cite it as the possible positive trend – a trend of one data point?  Come on.  Over half cheated, and it’s been that way for at least 10 years.  There’s not much good in that news.  Rather it’s more evidence of America's poor discipline trickling down to the next generation.