Archive for December, 2009

Inescapable Truth #2: People Act in Their Own Self Interest

Monday, December 28th, 2009

One of the keystones of the scientific method is the concept of reproducibility. If you perform an experiment, someone else should be able to reproduce your results. Few experiments have been subjected to this test as often as that of the Prisoner’s Dilemma. In this experiment, two prisoners can either stay quiet or rat on each other. Depending on how each prisoner acts, they can either both be released (quiet/quiet), both pay a small penalty (rat/rat) or one released and while the other pays a big penalty (rat/quiet). Wikipedia’s detailed description of this experiment is as good as any.

Every Psych 101 student who has performed this experiment finds the same thing: if you keep repeating the test, prisoners learn to avoid getting “taken advantage of”. A prisoner who rats every time will suffer no worse than the other prisoner and can go free if the other prisoner stays quiet. Prisoners will quickly figure out the “payout table” and work to maximize their “economic advantage.”

Note that midway through the last paragraph, I move from talk of prisoners to talk of payouts and economics. It is my premise in discussing this post’s Inescapable Truth, that humans perform similar economic calculations every time they act and that their goal is always to maximize their payout.

For some readers, this premise is obvious and they will wonder why it needs to be expanded upon; people will do what they think is best for them. Other readers, however, will immediately object, citing examples of personal sacrifice and altruism to the benefit of others. Let me address this dichotomy so that I can get to the meat of this post.

When I give money to charity, when I drive my mother to church, when I give my son the big piece of chicken, I am acting in my own self-interest. It makes me happy to see my son eat. It makes me happy to see my mom spend time at church with her friends. It makes me sad to see helpless people so I give money to charity because it makes me feel better about myself.

I would gladly give my wife one or both of my kidneys. I would throw myself in front of my children and take a bullet for them. I would prefer to die than to live with the knowledge that I did not do something to save my family. I would sacrifice myself to avoid intolerable personal suffering.

Sometimes, acting in one’s own interests happens to be of benefit to others, too. It is the nature of love that we find our personal suffering more acceptable than that of our loved ones’. It is economically more “valuable” to us to incur our own suffering than to subsequently tolerate the suffering of those whom we love.

What is great about this Inescapable Truth is that it is so reliable. We can build on any foundation, as long as it is solid!

The modern notions of free enterprise and free markets are based on the premise that we can rely on people to solve the complex math that results in the best economic return towards their own self interests. It is much more reliable to count on people acting towards their own self interest than it is to expect them to act in the interests of a broader, more abstract, sense of community. (N.B.: another psychology/sociology topic that covers this area is referred to as The Problem of the Commons. See here for more information).

It drives me crazy when I hear my fellow liberals sneer at “corporate greed.” There is no such thing as corporate greed. Corporations are ephemeral – they have no emotions. Corporations are run by human executives, of course, and they are capable of being greedy but why would they? Executives do not benefit directly from high prices or by defeating union votes.

When corporate executives behave badly it’s because they have been given incentives to do so. These are typically “performance-based” bonuses that are given them if they meet certain financial objectives, for example, revenue goals or stock price goals. Who sets these objectives and why are these objectives set?

Ultimately, corporate executives report to the Board of Directors and the board represents the interests of the shareholders. If the company does well, the company stock price goes up and the shareholders are happy. If the company doesn’t do well, the stock price falls and the shareholders are unhappy. Executives are given financial incentives to keep the shareholders happy. Corporate greed, then, is simply a misnomer for what should be shareholder greed.

Who are these greedy shareholders? Well, for the most part, they’re you and me. Most stocks are “institutionally owned.” Your IRA, my mutual fund, your savings account, and my aunt’s life insurance policy all typically end up investing in the stock market. Stocks have traditionally been great long-term investments (because their prices go up!).

When you chose your 401K investment plan, did you choose it for its moral business practices or because it has the best combination of low fees and high rates? When you chose your mutual fund, did you make sure that it was managed my ethical directors or did you simply find the highest rate of return with the lowest beta? Even if you do look for banks, funds and stocks with stated “green” goals, you still have choices. Given two ethical companies, which stock do you buy? Obviously, the one you think will make you the most money.

Welcome to the ranks of the Corporate Greedy. We want good returns. Corporate executives want to keep their jobs. The net result: directors that try to maximize returns. Everyone is acting in their own self interests.

There is nothing wrong with acting in one’s self interest. Once we understand that we are all acting consistently, it is simply a matter of aligning personal interests with some broader objective.  Economists love consistency – it’s so predictable! Make it profitable (e.g. through tax credits) to buy a hybrid and people will do so. Make it expensive (e.g. through regulation and civil penalties) and corporations will stop polluting. Making the math work is a lot easier than convincing people to do something simply because it’s the right thing.

Inescapable Truth #1: We Not All Created Equal

Wednesday, December 23rd, 2009

There are no pygmies playing in the NBA. Only women have babies. Whites are six times more likely to die of skin cancer than blacks.


Clearly, there are genetic differences between different groups of people in the world. Whether we group people by gender or ethnicity, it is easy to find certain differences based on genetic traits of each group.

Why is it so hard for us, then, to accept that maybe women process spatial information differently than men? Why is it inconceivable that there might be a genetic basis for why Koreans score higher on IQ tests than American and Egyptians?

Neither of the statements in the previous paragraph is a measure of character or worth. It is my observation that my wife stores spatial information as a “directed graph”: to get from A to Z, first you drive to B then to C, etc. Personally, I store information as a geographical map: I see that A is west of B while B is north of C, etc. Neither approach is “good” or “bad”. If we’re lost, I may have a better chance of finding my way through dead reckoning, but my wife seems to have encyclopedic knowledge of streets and how they connect to each other; she can get us out, too! Similarly, a high score on the Stanford Binet signifies only that you are capable of scoring well on the types of problems included in the test. It does not mean that you are a better employee or more creative or even a better general problem solver than someone who doesn’t.

In 2005, Larry Summers (President of Harvard, at the time) got skewered for suggesting that perhaps “innate differences” explain why fewer women succeed in math and science. Is it inconceivable that this might be true? If we are to succeed as mathematicians and scientists, do we not need to, perhaps, employ some statistics and the scientific process to determine whether the statement is true or not rather than summarily rejecting it?

The hypothesis that men and women might have different ways of processing information might be wrong. It might also be an inconvenient truth. That there are genetic differences between genders and between ethnic groups is an inescapable truth. What precludes genes on the female X chromosone from affecting brain development?

Some might argue that there are truths that are are best left unstated and unexplored. There is not much that we can do to overcome the realities of our genetic phenotypes. We is what we is. Would it not be disheartening for some groups to know that they might be genetically disadvantaged  when competing with others in some specific scope (i.e. pygmies in the NBA)? Maybe, but I am distrustful of any policy that relies on keeping knowledge from others. Besides, are we sure that we can’t cope with such knowledge? If I’m rooting for the Lakers, I want to see a 7′ tall, 300 lb.,  center . I don’t worry that this might result in discriminatory practices and that short people will be underrepresented in the position of NBA centers. If I’m trying to cure cancer, is it unreasonable for me to want the people best suited for the task? If that turns out to be a Korean female instead of an American male, I’m jiggy with it.

Of course, let’s also remember that while statistics tells us that Americans have an average of 1.89 children per family, I’ve yet to meet a single family with that number of children. The could be a 7′ pygmy and s/he might get to play in the NBA. Unquestionably, there are Americans and Egyptians with higher IQs than particular Koreans. Unquestionably, blacks occasionally get skin cancer and whites frequently don’t. Let’s not use the statistics as a sledge hammer.

Also, regardless of whether we discover that women do or don’t process information differently than men,  let’s continue to encourage them to enter the math and science fields. Let’s do what we can to encourage groups to succeed in areas in which they have not traditionally had success. Homogeneity is boring. Let’s bring in different people with different strengths to solve difficult problems.

Let’s not, however, freak out if the statistics resist our attempts to change them.

Inescapable Truths

Saturday, December 19th, 2009

Winston Churchill said,  “If you’re not a liberal at twenty you have no heart, if you’re not a conservative at forty you have no brain.” This adage says two things. First, it highlights that our opinions change as we get older. Second, it says that I have no brain 🙂

I remember having arguments with my father where I would be furious because he’d dismissed something I said solely on the basis of his greater experience. He’d predict that I would come around to his way of thinking as I got older. I would rail that age doesn’t necessarily equal wisdom but that would get me nowhere.

To my chagrin, being older now, I find that I understand my father’s position at the time. Unquestionably, personal experience does shape your world view. While, as a teenager, I could read the book, now I can go to the beach and be The Old Man in the Sea.  As a teenager, I could ponder a dozen meanings for the plot; as an almost-50-year-old, I can easily understand why The Big Catch is important to Santiago.

When you are young, there are no impossibilities. Your life is ahead of you and your potential futures unbounded.  When you’re old, not only have you realized that you will never play for the Lakers, you know how silly it was for you to ever imagine that you could have.

In this post, I am going to list a few things that I have learned over the years that I believe are “inescapable truths.” Some are exactly the types of things that I might have argued over with my father. They’re all the types of things for which my father would have employed the Experience Argument.

In this first post – I’m only going to list them. In later posts, I’ll go back and explain why each is inescapable and what their implications are. Note that I’ve chosen deliberately provocative titles for some items; wait for the explanatory follow-up post before complaing, though, since it may not be clear where I’m headed with each item.

Maybe you’ll disagree with me on whether they’re true or inescapable. Unless you’re at least 40 years old though you know how I’m going to answer you.

Here the list:

Manny’s Inescapable Truths

  1. We are not all created equal.
  2. People act in their own self-interest.
  3. There will be poor always.
  4. Nothing is perfect.
  5. Humans seek meaning.