120 Think Like A Freak

notes on the new Freakonomics book

The new Freakonomics book is even better than I anticipated

and strangely starts off with 2 chapters about the UK

- Got many questions
- so decided to write a thinking manual
- eg1 penalty takers should aim for the centre cos goalies never anticipate it
- why not done ... cos poss of looking like idiot is bigger than just failing to score a goal
- so ultimate success means not being afraid to be a FREAK

RECAP

- earlier books were about INCENTIVES drive life
so need to understand what to measure & how ..so crunch the numbers
Beware fallacies
1. CHALLENGE Conventional wisdom is often wrong
2. Correlation is not prove of Causality

Why people don't think

- 1. Confirmation Bias - seek it rather than objective
- 2. Running with the herd, so delegate thinking
- 3. No time to think

UK example

They were called into meet the PM
He told us that, upon election, the Cameron administration would fight global warming, tooth and nail…’If it were not for England,’ he continued, ‘the world would not be in the state it is in.’…England, he said, having started the Industrial Revolution, led the rest of the world down the path toward pollution, environmental degradation and global warming. It was therefore England’s obligation to take the lead in undoing the damage.”
the bias there is deciding from your own moral compass, instead of from the evidence.

eg of bias 2. The PM won't consider having the market brought into the NHS
- that's fear of getting egg on face

Meanwhile is it a bad thing if somethings are carefully privatised "No! is the instant green/left kneejerk reaction" - but the new Freakonomics book disagrees from the Spectator "Mr Cameron told them, moist eyed, that there were a few things he would be saving from cuts. Like what, they asked. “‘Well, the National Health Service,’ he said, his eyes alight with pride.”

"Well, it takes them no time to identify the difficulty with that one: “UK health costs had more than doubled over the previous ten years” and, as they observe, “when people do not pay the true costs of something they tend to consume it inefficiently. Think of the last time you sat down at an all you can eat restaurant. How likely were you to eat a bit more than normal? The same thing happens if health care is distributed in a similar fashion.” To make the analogy clear for Mr C, they ask him to imagine “what if, for instance, every Briton were also entitled to a free, unlimited lifetime supply of transportation. That is, what if everyone were allowed to go down to the car dealership whenever they wanted and pick out any new model, free of charge.” Well, that went down a bomb. The smile, they observe, stayed on Mr C’s face but went out of his eyes before he made off..."

- to be fair Freakonomics bias is that the market delivers, but in the UK health costs are 10% of GDP and in the US they are 20% ..so the market is failing in the US
- Also if they are so sure about free market ..contradicted by fact they are on Public Radio not commercial radio.
- Also contradicted later in their eg where the capitalist parents in China fail to buy their kids glasses, but socialist experiment of giving them free $15 glasses works ..thats like the NHS in action

We are taught to bluff
Not saying "I don't know*" is a huge thinking block


- we are programmed from kids to fill in the blanks instead
* don't be afraid to SIDK

Philip Tetlocks research tells us experts bluff

- They resort to dogmatism instead of IDK p>Backed up by Paul Krugman "Most economists predictions are wrong"

Costs of SIDK are bigger, than not , cos odds are you can bluff your way out

Think what are your opposite arguers incentives ?
- eg Harrabin has deceived so long , that he cannot backtrack and tell the truth on climate.

Incentive: wild predictions pay off

- You win gold if you succeed, but actually everyone forgets if your prediction failed

Suicide happens when you blame yourself as can't blame others

- They explain that to justify the extraordinary stat that black males suicides are only 1/3 of males ... they can always blame someone else

Seek & listen to Feedback

making mistakes, vote results etc
eg the shop that wouldn't test it's own advertising progs for fear of execs being embarressed

TEST by seeking natural experiments
Set up field trials (lab trials don't work in social science)
- do it properly RANDOMIZE

Examples Surprise

- People can't tell expensive wine by taste
- expt proved restaurant wine awards were just awarded for buying advertising

Stop pretending to know answers that you don't !
cos the incentives to pretend are so strong, this may some bravery on your part.

2

Are you asking the right question ?

e.g. How can we improve our schools ?
when you mean How can we improve kids skills ?
- you see you built an assumption into the question that skill is only about schools

Being systematic works ..see how the Japanese eating champion broke all records

- 2 egs Abortion laws explain drop in US crime

- religion correlates to a small difference in salary in Germany between Catholic and Protestant villages
- ding a ling aren't such things over-simplistic ?

- Another example - African Americans live shorter tham whites - why - they get 50% more hypertensin- why controversial theory is that slave owners selected saltier slaves , cos could stand journey better.

... hmm group populations are not equal,eg Japanese Americans might live longer still or have higher incomes , but principle is you treat people as individuals

- Another example - ulcers correlation with stress
- incentives the drugs industry was making $8bn/yr selling drugs ..did they have an incentive to not find the simple truth ..the myth was no bacteria could withstand stomach acids .. that is a strange thing ..surely someone knew that was not true.
- - The Australian researcher found another correlation quite by chance ..rather than being systematic at first
- In this market there do exist incentives to be honest not just make money
- (what about climate change are there incentives ..seems most are to hype ..corps who want to avoid tax/fuel costs have an incentive to disprove ..seems to be that is like only small ? well all corps what to avoid that, but the most easy profits come from hyping )

Think like a child

- sit on ideas 24hours
- Think small - brick by brick approach ??
- small ideas can have big impacts eg checking kids eyes and giving glasses

Have Fun

- expertise comes not from genius so much as PUTTING in the TIME.. so having fun is important

Making use of fun

- I had already thought why when I go in the COOP is it immediately obvious it's not ethical cos much of it's biz depends on people being addicted to lottery tix and alcoholics ..and shouldn't lottery ticket money be put back to the buyer so they win. - BY shear coincidence Freakonomics came up with a great solution Prize-linked savings PLS. You come in and put your £1 and it goes into your savings account, but it is the interest that goes into the lottery fund, which I few luky winners get.
Lets play that out £1 a day= £200 a year, 5% interest gives you about £5/year
imagine 100,000 customers ..so that's £500,000 in the prize fund..enough to pay 25 people £20,000 each ..ie 1 in 4000 people win
- Whereas a lottery would have 100K x £200= £20m = £12m for the punters and £8m for the promoters, which is enough to pay 600 people £20,000 ... so that is 24 times more winners.
(It's like the premium bonds, but regular saving)

Idea : The COOP unethically makes much of it's money from lottery addicts, couldn't it run it's own premiumbond weekly saving scheme Freakonomics pg 98 1/2

Go into ways think better than adults..mostly cos not tunnel vision that misleads adults

Incentives

- it's not only money - find what someones motivation is

- In proper tests going with th her was the biggest motivation ..hence sign "most people switch of the lights" is the most effective one
- never right a sign tht suggests many people are breaking the law ..as it actuall encourages others to join that crowd

3

Change the Frame

eg how the charity guaranteed not to ask a second time ..it became like a friend

HFC-23 fuck up ..UN wanted to reduce amount of The strong greenhouse gas released.
...first UN paid people credits to destroy it. Result corps produced more to destroy
Second UN ended the scheme : meaning corps have huge stocks they'll probably release.
Net effect UN has paid out money and created more pollution.
It's the bounty effect ..noticed when British gave a bounty on cobras the Indian peasant started farming them.
Lesson .. you can't beat the market
and trying to often changes the market in ways you didn't expect.
People resent being manipulated

..well how to change alarmists ..incentivise them

Cunning

- On brown M&Ms rule was a cunning way to check if the venue had followed all the safety instructions

see how it's a way of dividing the good from the bad

- They postulate that that is what trial by ordeal is about, the guilty would rather plead guilty, the innocent will do it, but you rig it so they don't get hurt

_ similary that's how Zappo shoes "pay you to resign" option works it seperates the loyal from the unloyal

Other eg secret bullet factory told British to call before visits so beer could be put on ice

eg2 Nigeria scam letters seem too obvious but what it is doing is filtering the smart from the dumb

eg Their trap which told terrorists that terroists never buy insurance from their bank.

Persuading

- It's difficult so avoid it

- Intelligence confidence effect : extremists on either side of climate debate are more intelligent.

- Make it a story ..featuring them
How would you do this for Climate alarmism ?

Good to Quit

stupidity of following the Churchill spirit of never never quit, but often it is smart to quit..find the limit and move on to something more productive ..research that finds failure as quickly & cheaply as possible is good

- eg of the corp that set up an office sweepstake as to whether a store would open on time. It correctly predicted failure even against the confident words of managers.

premortem idea ..imagine what could go wrong before it does ..hang on that is the same as risk assessment we already use

..I've actually already heard all the stories at the end of the book probably on the podcast

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a Stew Green opinion
Out of the box thinking
- from someone who was never in the box in the first place
moved from the USEFUL BLOG to the REALITY CHECK BLOG

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