Risk Savvy: How to Make Good Decisions – Gigerenzer

“The breakneck speed of technological innovation will make risk literacy as indispensable in the twenty-first century as reading and writing were in previous centuries.”

Understanding and dealing with risk is essential in almost every aspect of the modern world; medicine, transportation, education, public policy, even game shows. Most of us do pretty badly at it; despite the fact that you’re more likely to die driving 12 miles than flying from New York to Washington, we feel more worried in the airplane than on the drive to the airport. The response of policymakers has been to argue the need for experts to save us from our biases. Risk Savvy disagrees: what we need, Gigerenzer argues, is risk education. Understanding probabilities is something that can be learned, and must be if we are to function in the world.

Gerd Gigerenzer is best known for his work arguing that though it’s easy to criticize instinct and human decision making as being biased and flawed, in reality those biases actually work better than being unbiased would in the majority of situations. We aren’t broken, leaky beta versions; rather, we operate with a well-designed and effective ‘adaptive toolbox’ one that allows us to successfully navigate a wide variety of situations with considerable success and a minimum of effort.

Gigerenzer is a top academic doing very interesting work in psychology, and I think his academic work makes some great reading. Unfortunately, this book is not that. He’s oversimplified his work, and as a result it often feels like a linear combination of other pop behavioural economics books, rather than a new addition to the field. He has some great examples of his points and some great stories, but nothing new to add to them. Still, some of the facts are really good. Consider the disparate policy approaches between mad cow disease and child proofing scented lamp oil bottles, despite the fact they kill similar numbers of people, or that reading to a 8-16 month year old child boosts their performance on language tests by 7 points, while watching TV reduces it by 17 points. Not world shaking, and not illustrating anything you didn’t already know, but interesting. Still, if I were you I’d stick with some of his earlier books.

The Panic Virus – Seth Mnookin

“Combined with the self-reinforcing nature of online communities and a content-starved, cash-poor journalistic culture that gravitates toward neat narratives at the expense of messy truths, this disdain for actualities has led to a world with increasingly porous boundaries between facts and beliefs, a world in which individualized notions of reality, no matter how bizarre or irrational, are repeatedly validated.”

In 2009, there were more than 13,000 cases of pertussis (whooping cough) in Australia. In 2010, the pertussis outbreak in California was so bad that some countries started warning their citizens about the dangers of traveling there. It still kills around 80,000 people a year globally. Most deaths are in Africa, where vaccination efforts are incomplete: increasing number of infections, however, also occur in the developed world, where there is no excuse. The reason, Mnookin argues, is increasing parental anxiety about vaccines.

Having read hundreds of scientific papers and thousands of pages of court transcripts for the book, Mnookin argues the evidence in favour of their use is decisive. Further, when children are not vaccinated it places those who cannot be, either because they are too young or have weak immune systems, at risk. Yet in many ways he is sympathetic to parents: overwhelmed by the flood of false information in the internet, they are understandably nervous about their child’s health. Instead, he places the blame on a media that prefers ‘neat stories at the expense of messy truths’ and the ‘charlatans and hucksters’ like Andrew Wakefield who have taken advantage of the fears of parents.

Scientists and the courts have been unequivocal in their support of vaccination, and Mnookin does a good job staying sympathetic to victims while sticking to the science. As he points out, critics of vaccines have often raised legitimately troubling questions insufficiently addressed by the medical community, but that somehow those critics have also decided they have the right to choose their own answer, instead of believing the science. The book thus reads not just as a discussion of vaccines, though it is comprehensive on that subject, but also as an examination of modernity and relativism in general. For anyone interested in the debate, I think there is no better reference on the issues of autism, a much needed counterweight to Oprah, Jenny McCarthy, and other well-meaning people whose advice puts children – and adults – at risk of serious harm.

Bill Gates Summer Reading Recommendations

Gates is good about giving book recommendations, so I thought I’d pass them along: this list is shorter than usual, actually. The comments about each book are his (I can’t get away with talking about Buffet like a personal friend): I like Ezekiel Emanuel, so would probably read his, and Doris Kearns Goodwin is always a good place to start. Any book that’s the favourite of Bill Gates and Warren Buffet seems like a reasonable choice, too.

Business Adventures, by John Brooks. Warren Buffett recommended this book to me back in 1991, and it’s still the best business book I’ve ever read. Even though Brooks wrote more than four decades ago, he offers sharp insights into timeless fundamentals of business, like the challenge of building a large organization, hiring people with the right skills, and listening to customers’ feedback.

Stress Test, by Timothy F. Geithner. The central irony of Stress Test is that a guy who was accused of being a lousy communicator as U.S. Treasury Secretary has penned a book that is such a good read. Geithner paints a compelling human portrait of what it was like to be fighting a global financial meltdown while at the same time fighting critics inside and outside the Administration as well as his own severe guilt over his near-total absence from his family.

The Bully Pulpit: Theodore Roosevelt, William Howard Taft, and the Golden Age of Journalism, by Doris Kearns Goodwin.I read a lot about Teddy Roosevelt last year, around the time Melinda and I took our kids to the Panama Canal. He was instrumental in getting the canal built, and I’d assumed it was the highlight of his career. But it wasn’t. It’s a testament to the breadth and depth of Roosevelt’s accomplishments that the canal warrants only a handful of mentions in this biography.

The Rosie Project: A Novel, by Graeme Simsion. Melinda picked up this novel earlier this year, and she loved it so much that she kept stopping to read passages to me. I started it myself at 11 p.m. one Saturday and stayed up with it until 3 the next morning. Anyone who occasionally gets overly logical will identify with the hero, a genetics professor with Asperger’s Syndrome who goes looking for a wife.

The Sixth Extinction: An Unnatural History, by Elizabeth Kolbert. Climate change is a big problem—one of the biggest we’ll face this century—but it’s not the only environmental concern on the horizon. Humans are putting down massive amounts of pavement, moving species around the planet, over-fishing and acidifying the oceans, changing the chemical composition of rivers, and more. Natural scientists posit that there have been five extinction events in the Earth’s history (think of the asteroid that wiped out the dinosaurs), and Kolbert makes a compelling case that human activity is leading to the sixth.

Reinventing American Health Care: How the Affordable Care Act Will Improve Our Terribly Complex, Blatantly Unjust, Outrageously Expensive, Grossly Inefficient, Error Prone System, by Ezekiel J. Emanuel. One of the architects of the Affordable Care Act (a.k.a. Obamacare) makes the case for why the U.S. health care system needed reform and how Obamacare sets out to fix the problems. Although he was deeply involved in its creation, Emanuel is good about making it clear when he’s educating you about the history of health care and when he’s advocating for his ideas. And unlike a lot of experts, he’s willing to make predictions about how health care will change in the coming years.”

You can also watch a video of him talking about it, here.

Grimm’s Fairy Tales

“’Never mind, cut it off. When you are queen you will not care about toes; you will not want to go on foot.’ So the silly girl cut her big toe off, and squeezed the shoe on, and went to the king’s son.”

“L’histoire nous apprend ce que sont les humains / La fable ce qu’ils doivent être.” – Voltaire (History teaches us what humans are / stories tell us what they should be.

Grimm’s Fairy Tales have come a long way from their original form, standardized and gentled by Disney and other authors. In the Western tradition, though, they represent a seminal work in fairy tales, matched perhaps only in influence by One Thousand and One Nights. They can definitely be violent, often sexual, and always rude.

They also, however, serve to focus on themes, not individuals: on ideas, not specific settings. Characters are called ‘The Woodsman’ or ‘The Brother’, not given names, in order to ensure it is as widely applicable as possible. They also serve to teach fairly basic lessons about morality, including:

1)      Over-cleverness and arrogance are not rewarded.

2)      Always be polite.

3)      Keep your promises.

4)      Share what you have.

5)      People get what they deserve – out of their own mouths they are condemned.

Stories don’t get much credit these days, nor does fiction, but Voltaire, I think, has a point.

Capital in the 21st – Quotes

Having reviewed Piketty’s Capital earlier this week, I thought I’d also pass along a few choice quotes. If you haven’t read the review yet, though, I’d start there.

On his thesis

“A society structured by the hierarchy of wealth has been replaced by a society whose structure depends almost entirely on the hierarchy of labor and human capital. It is striking, for example, that many recent American TV series feature heroes and heroines laden with degrees and high-level skills, whether to cure serious maladies (House), solve mysterious crimes (Bones), or even to preside over the United States (West Wing).”

“Inequality is not necessarily bad in itself: the key question is to decide whether it is justified, whether there are reasons for it.”

“When the rate of return on capital exceeds the growth rate of the economy (as it did through much of history until the nineteenth century and as is likely to be the case again in the the twenty-first century) then it logically follows that inherited wealth grows faster than output and income.”

On ideology

“I was vaccinated for life against the conventional but lazy rhetoric of anticapitalism, some of which simply ignored the historic failure of Communism and much of which turned its back on the intellectual means necessary to push beyond it.”

“Both the antimarket and the antistate camps are partly correct: new instruments are needed to regain control over a financial capitalism that has run amok, and at the same time the tax and transfer systems that are the heart of the modern social state are in constant need of reform and modernization, because they have achieved a level of complexity that makes them difficult to understand and threatens to undermind their social and economic efficiency.”

Interesting Facts

“There is no historical example of a country at the world technological frontier whose growth in per capita output exceeded 1.5 percent over a lengthy period of time.”

“Billionaires today own roughly 1.5 percent of the world’s total wealth, and sovereign wealth funds own another 1.5 percent.”

“Capital is a better indicator of the contributive capacity of very wealthy individuals than is income.”

Capital in the 21st Century – Thomas Piketty

“The overall conclusion of this study is that a market economy based on private property, if left to itself, contains powerful forces of convergence, associated in particular with the diffusion of knowledge and skills; but it also contains powerful forces of divergence, which are potentially threatening to democratic societies and to the values of social justice on which they are based.”

This is a longer review than I normally write, so I thought I’d summarize takeaways first (who has the time to read long reviews with all those cat videos?)

  • Overall very good: lots of interesting information on wealth and income inequality.
  • Before world wars, inequality was from wealth inequality; now, it comes from income inequality. Rise of the supermanager.
  • Policy analysis weak – hasn’t really considered other options or read the literature. Still, capital tax may be good idea: can replace the common and unfair real estate tax. WIsh he had discussed a consumption tax.
  • Long run, the only cure to inequality is better education.
  • No big surprises: basically just fleshes out ideas that most people would have believed true intuitively, if without data.

Piketty’s work has been ridiculously popular: for a 600 page economics treatise to outsell fiction on Amazon.com is amazing to me, particularly given that it wasn’t very popular in France, where it was first published. Still, any book that can manage that is worth a read.

Piketty argues that because the interest on capital (r) is larger than the growth rate of the economy (g), capital ends up growing faster than the economy. Over time, therefore, capital owners own a larger and larger share of the whole pie, which leads to inequality. Though there are compensating factors, like the diffusion of knowledge and skills, without comprehensive educational policies and redistributive taxation, this inequality can grow to extreme levels. He uses income tax and estate tax information to study wealth and income inequalities over the past 200 years, finding high inequality pre world wars, low inequality after world wars, and increasing inequality today, though unlike before the wars, it is largely due to income inequality, not wealth inequality (managers with high salaries, not landowners).

His fundamental insight, as anyone who has read a review will know, is the fact that r > g. I think that’s true, and it does have the effects he describes, but speaking as an economist it’s also not surprising. Interest rates on capital are relatively high partly because people are impatient and aren’t good at saving, at least judging by their ability to save for retirement. If society lowers the return on capital, people will save less, and I’m not sure that’s a good thing either, something Piketty doesn’t consider. Still, he’s right that increasing inequality can be a source of stress for society, and it’s definitely an important subject for study.

The book is divided into a section analyzing the data, a section predicting future trends, and a section discussing policy. The first section is excellent; the Financial Times has raised some problems with his data work, but by and large I think it’s well done and the results are unchallenged. Lots of interesting information. The second section has the bad habit of making a prediction then immediately disavowing it as a guess, which is common but I think a bit disingenuous.

The third section I found very weak. The policies he supports may well be good ones, and I think there are good arguments for a capital tax, since most countries have a property tax and that’s basically just a capital tax that’s very unfair to the middle class. It’s clear this is not an area Piketty has thought about much, though, and his discussion of education policy is pretty shallow. Dismissing a consumption tax based on total spending, which is often a popular policy, he rejects it in a single line as never having been done, before advocating a global capital tax that has also never been done before. Long run, as he points out, it appears the only cure to inequality is better education and better skills transfer, and I think almost everyone, left or right, would support that.

Whether when you think of capital you think of landed aristocracy, as the French Piketty does, or of Bill Gates, as I suspect a lot of North Americans do, may play a role in how you feel about the book. In the end, I think the power of Marx’s original Capital is that it provides a new way of thinking about the world. I didn’t find Piketty managed the same: perhaps it’s because I’m an economist, but most of what he said I would have assumed to be true. I also find anyone that introduces mathematical identities (like 2+2=4, things that are defined to be true) as “fundamental laws of capitalism” to be a little pretentious for my taste, but that definitely doesn’t relate to the overall quality of the book. It’s well worth a read, and thinking about inequality and its solutions is definitely an important issue.

You can see the Amazon reviews here.

The Principles of Scientific Management – Frederick Winslow Taylor

“We can see our forests vanishing, our water-powers going to waste, our soil being carried by floods into the sea; and the end of our coal and our iron is in sight. But our larger wastes of human effort, which go on every day through such of our acts as are blundering, ill-directed, or inefficient…are but vaguely appreciated.”

Which would you prefer? Good pay, but a job where every detail is spelled out for you, with no chance for autonomy or individuality, or worse pay, but a job where you can use your personal expertise to make a difference to the result? That question lies at the heart of your judgment of the Scientific Management.

I’d hate to speculate how many (or few) management consultants have read it, but Scientific Management is a seminal work in the field, quite possibly a founding work. Taylor argues that progress requires management to become more scientific: that the traditional knowledge of workers must be studied and tabulated by management, and narrow, well-defined tasks should be given to workers, with every aspect detailed. Managers shouldn’t just ask workers to carry pig iron: they should specify how far, how heavy a load, how long to rest, how often, and method of lifting.

Some of Taylor’s suggestions seem reasonable to modern ears: he recommends frequent breaks for workers and limits on hours, for example, so that workers can “work while they work” and “play while they play.” More fundamentally, one of his core suggestions is simply to gather data, which I certainly wouldn’t disagree with: finding the best weight someone can shovel without hurting their back is an experiment anyone who has shoveled snow can support.

Where Taylor runs into trouble is the extreme centralization of knowledge his system requires. As Shop Class as Soul Craft can tell you, such a reduction of worker responsibility can be dehumanizing, and long run it’s hard to believe anyone can perform well when they feel like a cog in a machine they do not understand. To be picky, his experiments are also terribly run, and the results are almost entirely attributable to selection bias, since he fires anyone who doesn’t perform: clearly average performance increases then, but it need not have anything to do with management methods.

Still, the book is worth reading, particularly if you plan to talk to MBAs very often. Even if you don’t, Taylor provides a frank commentary on how he sees the problem of management, and perhaps particularly if you disagree, it’s useful as a way to figure out what you think might work best.

Summer Reading Suggestions

In honour the end of June (and Canada Day!) I thought I’d offer some suggestions for reading for the summer.

Food and The Omnivore’s Dilemma – Michael Pollan

Summer’s the perfect time to review your eating habits, and Michael Pollan is the perfect person to help.

The Better Angels of our Nature – Steven Pinker

A long book, but one that is worth taking the time to read. Pinker will tell you why you can still be optimistic about humanity: violence is falling, cruelty is diminishing, and overall we’ve actually been quite successful at reducing war, homicide, and other violent crimes.

The Righteous Mind – Jonathan Haidt

Summer’s also a good time for trying to reach across the aisle and understand the other side. Haidt is the ideal way to do that: fair and openminded, he analyzes morality, and instead of arguing the other side is immoral and the debate so often seems to descend to, he looks at the basis for morality that underlie the arguments on both sides.

Quiet – Susan Cain

A nice light read, but for all the introverts out there who sometimes feel overwhelmed by an extroverted society, a great read.

On my stack

Of course, I plan to do some serious reading myself, too. On my stack at the moment is

Capital in the 21st Century – Thomas Piketty

This 700 page economics treatise outsold fiction for weeks on Amazon: what that means for readership I have no idea, but at the very least there’s a lot of copies out there.

The Panic Virus – Seth Mnookin

An examination of the autism-vaccine controversy.

Risk-Savvy: How to make Good Decisions – Gerd Gigerenzer

Gigerenzer is an unusual psychologist who argues that the modern perception that we are biased actors who need to be fixed is flawed. Instead, he argues for biases as an ‘adaptive toolbox’: a series of adaptations that are by and large useful to us.

J’accuse – Emile Zola

The classic work of the Dreyfus Affair. In French, which is slowing me down but good for me.

The Notebooks of Leonardo da Vinci

We’ll see how these read when I get there!


George-Etienne Cartier: Montreal Bourgeois – Brian Young

“Tied to a specific mid-nineteenth-century milieu, Cartier, in his family, life-style, social ambitions, politics, and professional and business interests, serves as one barometer of the Montreal bourgeois experience.”

Canadian independence was rather less traumatic than the American experience, lacking a revolutionary war or even (so far) a civil war. Nevertheless, involved significant institutional change, as a country that initially consisted of only four provinces in Eastern North America attempted to develop its own institutions, culture, and society. One of the leaders in this process was George-Etienne Cartier, a French-Canadian statesman and partner of John A MacDonald.

I don’t really expect anyone who isn’t a Canadian history buff to have heard of Cartier, and since Brian Young’s book quotes liberally from French sources without translating, I wouldn’t recommend the book to anyone who wasn’t one either, or at least to anyone who doesn’t speak French. The book is interesting though: rather than attempting to retread old ground, it focuses on Cartier’s origins and bourgeois background, before skipping to his political life.

It is his political activities, in the context of a young country trying to grow, that are particularly interesting. He was instrumental in codifying the laws of Quebec, which still operates under a different legal code than the rest of Canada; helped establish the school system of Quebec, imposing a tax-supported system on a reluctant population; and most of all bringing Quebec into Confederation, his alliance with MacDonald instrumental in convincing Quebec to join. Cartier was a French nationalist, but one who believed that Quebec was better off in a union within a greater Canada, rather than outside it or paired only with Ontario.

Canada still struggles to reconcile the French and English elements within it, a cause that has endured from Cartier’s day. Without him, though, and people like him, Canada might never have existed as it does today.

Spillover – David Quammen

“Human-caused ecological pressures and disruptions are bringing animal pathogens ever more into contact with human populations, while human technology and behaviour are spreading those pathogens ever more widely and quickly.”

The elimination of smallpox is unquestionably one of humanity’s greatest achievements. Before it was eradicated, it killed upwards of three million people per year in the 20th century, far more than the world wars or any other cause. Sadly, it also remains one of only two diseases to be eradicated in human history (the other is rinderpest): polio has seen a recent resurgence, partly due to unwillingness to accept vaccines, and we aren’t even close on most other diseases. A dramatic failure on humanity’s part, and one with an end goal that we all agree on: it doesn’t bode well for global warming.

Quammen, however, has some more bad (but interesting!) news. Many diseases are zoonotic: they use animals as reservoir hosts, often causing no symptoms, and are only noticed when they mutate and jump to humans. AIDS, Ebola, bubonic plague, Spanish influenza (and all influenzas), West Nile fever, rabies, anthrax, Lyme disease; all zoonotic, and the list goes on. That means elimination isn’t really an option, unless we’re prepared to resort to xenocide against the species in question, and as humans eliminate natural habitats and spread more widely we make cross-species infection, called spillover, more and more likely. In most countries, AIDS education materials recommend practicing safe sex or not sharing needles: in Cameroon, the signs recommend not eating apes.

What makes the book work is that the existence of reservoir hosts makes the study of the disease like a detective novel: scientists have to search for the reservoir and solve the mystery, though most of them don’t wear deerstalkers. Disease is one of those things it’s easy to forget about when we’re not in the grip of a crisis, but preparation, as with anything, is critical to reducing the impact later on. For that reason alone, I’d say it’s worth reading Spillover: the fact that it has some fun stories and interesting characters in it is icing on the cake. Even better, mind you, is seeing Quammen speak in person about it, as I was lucky enough to do: he’s a good speaker, and summarizes both content and stories well. Either way, a serious issue for humanity, and one the wise should definitely be thinking about.

You can get a copy of Spillover here.