Posts Tagged ‘society’

Do incentives increase performance?

November 20th, 2008

The NY Times had this editorial today about incentive bonuses. In the article, he presents seemingly strong evidence that bonuses shouldn’t matter. In experiments in India and MIT, participants who were offered truly substantial rewards performed *worse* than people who were offered small rewards. His conclusion: don’t pay large performance bonuses to investment bankers.

I take exception to the author’s interpretation of the experiments. It misunderstands how incentives operate. Offering higher rewards doesn’t necessarily make individuals perform better. I can only run so fast, and try as I might, I can’t shave a minute off my fastest mile run even if you offer me $1 million or even $1 billion.

However, there are runners out there who can beat my time 60 seconds or more. And some of them are doing more lucrative things, like professional sports or even investment banking etc. If you offered them the right price, you might be able to get them to leave those other jobs and participate in your race.

So, Dan Ariely is way off the mark in drawing the conclusion that investment banks could perform just as well without performance bonuses. Run back to the Ivory Tower at Duke, Dan!

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Desperately seeking Ayn Rand…

November 18th, 2008

These personal ads are hysterical. An example:

I am rational, integrated, and efficacious. So far, I’ve never met a person who lives up to the standard I hold for myself (except online).

I take my relationships seriously. I am simply not attracted to many of the women in this world. I do not “hook-up” with girls. I only kiss those who deserve, and so far I have only encountered one who did. I would love to find someone I can learn something from; someone who challenges me to think; someone I can feel like I’ve won, rather than lowered myself to.

- Zak, Long Island, New York

What girl would not respond, “pick me, pick me – please let me be worthy!”? I guess we ought to be concerned, as Cass Sunstein argues, about polarization in the Internet age.

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Crowdsourcing Watergate

October 29th, 2008

Today’s NY Times had a sobering article about the demise of old media. I’ve been a proponent of blogging and other citizen initiatives, but I think that the old media has a role that will be missed if newspapers exit stage left: holding powerful people accountable through direct access. Is the SecDef going to respond to bloggers directly? There really is something about the fact that public officials have formal and informal communication with certain reporters, and that these reporters have some independent standing.

As Lance Bennett said at a talk yesterday, “Can you really crowdsource Watergate?”

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October 19th, 2008

Sarah, meet Tina. Tina, meet Sarah. Enjoy!

(By the way, SNL has a good online video strategy. It was very easy to link to this video — and that makes me happy.)

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Viral Marketing

October 13th, 2008

This presentation by the founder of RockYou has (almost) everything you need to know about viral marketing. A tour de force if you want to understand this kind of stuff.

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Another sign of the (financial) apocolypse

October 10th, 2008

McCain is calling for regulation changes to end mandatory sales of retirement funds at age 70 1/2. Why should people be forced to sell when the market is “hurting”? Ugh! Since when does McCain know how and when the market will recover? In fact, he’s stumbled on to part of the problem: retirees *need* to take out money from the market continuous to live on! That is at the heart of the current (and ongoing) financial crisis.

And ladies and gents, it is only going to get worse as more and more baby boomers approach retirement age. Demographics are destiny!

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How to reform the system

October 1st, 2008

So, my last two posts have argued (1) that we are faced with a deeper crisis than even the media have lead us to believe and (2) that there is a better alternative to the proposed bailout (and both the bailout and my plan are superior to doing nothing). Now, I want to turn to reform. How can we avoid making the same mistakes again in the future?

In a discussion I launched on e-thepeople, someone referred me to the “genesis plan.” In it, the plan proposes changes regulatory changes to limit/end off balance sheet vehicles, to reform credit derivatives and to re-impose limits on leverage for financial institutions. I find the links between the causes and effects to be well-argued, so I think his proposal deserves serious consideration.

As a long-term regulatory reform package, I think it dovetails nicely with my short-term plan to encourage a quick recovery from the current asset bubble we are in.

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My three point plan to solve the current financial crisis

September 29th, 2008

Here is my three point plan to solve the current financial crisis:

  1. Offer tax cuts to people who buy houses in the next six month
  2. Offer tax cuts to financial companies that offer credit in the next six months
  3. Offer temporary immunity from recourse to people who default on their mortgages (or renegotiate it to reflect the current market value of their home)

I have written about my reasoning behind this plan and hope to spark a discussion about it on

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My view: more doom and gloom in the markets

September 24th, 2008

1929 crash

  1. If you are ‘too big to fail,’ you are ‘too big to go unregulated.’
  2. The bailout plans being discussed now are all *terrible*

    • they reward companies that were recklessly over-leveraged
    • they reward homeowners who were recklessly over-leveraged
    • they penalize any people or companies that did not participate in the reckless borrow & spend tactics
    • they substitute lack of accountability in the private sector for lack of accountability in the public sector
  3. Short sellers provide accountability to companies – they aren’t the problem, they are part of the solution
  4. As we focus on government bailouts, we are missing the fact that Bank of America’s has put US tax payers on the hook (through FDIC insurance) for a catastrophe in Merrill Lynch’s portfolio
  5. This bailout is going to pale in comparison to what happens when there is a run on the mutual funds. More on this later, but look up “embedded tax liability” and you’ll get a peek at what will almost certainly happen as baby boomers reverse the trend from net contributions to net disbursements in mutual funds
  6. To all those who repeat “focus on asset allocation because markets always go up in the long run”: don’t forget that the “long run” has meant 25 years in at least one case in our history
  7. Neither Obama nor McCain or any other political leader has a clue what do right now

Unfortunately, I do not have a solution to these incredible problems. I do believe that acknowledging these problems sooner rather than later is critical in containing the damage of twenty+ years of living beyond our means as a country.

Have a good day!!

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“The music may sound different…

September 18th, 2008

…but the message is the same.” Weird and oddly catchy.

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Robocalls – Part II / Spy vs Spy – Part II

August 26th, 2008

I recently posted about annoying Robocalls that I’ve received. In response to them, I’ve changed my phone setting so that no one who hides their phone number can call me. But that hasn’t stopped the robocallers. I just received my 40th or so “second notice” about my auto-warranty. This time, I got some information. The caller is “NIC Reinecker” at 620-585-0104.

Unfortunately, I could not reach anyone at that number. However, I did google the number and this interesting site popped up. This a spy vs spy site that lets people like you and me coordinate our efforts to fight these evil telemarketers. You can type in the number or name from your caller ID, and find out what others have experienced and tried to do to respond.

In this case, however, the only gratification I got is knowing that I am not alone in this fight. As I posted earlier, we just don’t have the tools to fight back on this scourge yet.

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Cognitive Surplus

August 25th, 2008

Here’s a provocative video. It received a warm reception at e-thePeople and nice discussion. Here’s how I described it on etp:

Where do you find the time to participate in e-thepeople? Clay Shirky suggests that e-thepeople, wikipedia and other participatory media find the time by tapping into the cognitive surplus, the 200 billion hours Americans spend watching TV each year in the US alone. He claims that people choose participation over consumption, when given the chance. What do you think:

Is participatory media a revolution or just a fad? Is your time on e-thepeople valuable or a waste of time?

Watch it here:

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The fundamental need to belong

July 28th, 2008

This blog post by Mark Pesce presents the case that social networking is revolutionizing human social creation. Here is a breathless snippet:

We have a drive to connect and socialize: this drive has now been accelerated and amplified as comprehensively as the steam engine amplified human strength two hundred and fifty years ago. Just as the steam engine initiated the transformation of the natural landscape into man-made artifice, the ‘hyperconnectivity’ engendered by these new toys is transforming the human landscape of social relations. This time around, fifty thousand years of cultural development will collapse into about twenty.

At first, I thought it was over the top. But I actually think Mark Pesce is about right. Here’s the example that I like to use. Most people who graduated from college before Facebook think that Facebook may be a way to meet people or to organize parties. That happens a little bit, for sure, but Facebook has a much more profound impact on students. They don’t use Facebook to throw parties; they throw parties to generate compelling content for their facebook profiles. If it’s not on Facebook, it doesn’t matter. Didn’t really happen.

In my opinion, the transformation has begun.

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Why failure isn’t the worst outcome

July 23rd, 2008

homerHere’s a pretty insightful post-mortem from a failed startup. Key lessons learned (stated in the positive): start small and get feedback; have a good partner; pick a good market. To me, the most interesting thing about this story is how it highlights how failure isn’t the worst outcome. He concludes:

“It’s not really the end of my startup journey – I suspect there will be other startups in my future, both as an employee and hopefully as a founder. But it’s the end of this startup. I’m a little sad about that, but I have no regrets about having started it.”

He is spot on. At a minimum, a true failure like this gives the founder an important experience to draw on in the future, especially when you can be as honest and thoughtful about the failure as this entrepreneur is.

So what’s the worst outcome? Mediocrity. If you languish around making tiny steps forward, and a few backward, you can more easily delude yourself to chase the mirage that’s just around the next corner. This entrepreneur, although his current venture has failed, can live to fight another day on a better battleground.

Congrats to Jonathan Tang for avoiding mediocrity and may his next venture be the best outcome, success!

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