Crawl Across the Ocean

Tuesday, April 26, 2011

89. Moneyball

Note: This post is the eighty-ninth in a series about government and commercial ethics. Click here for the full listing of the series. The first post in the series has more detail on the book 'Systems of Survival' by Jane Jacobs which inspired this series.

Just a short, light-hearted post this week, as vacation calls (next post will be on May 17).

I've been reading the book 'Moneyball' by Michael Lewis. When I started reading it, I didn't do it with the intention of relating it to this series of posts, but I couldn't help myself (yes, it's possible that I should seek help of some sort).

Moneyball tells the story of how the Oakland A's were able to succeed at Major League Baseball, despite having less money to spend on players than their competition, by innovating in their approach to winning games.

Baseball, like most sports, is in essence a guardian activity, fulfilling the guardian precept to 'make rich use of the leisure', by the same token as the 'shun trading' precept led to the establishment of the Olympics only for amateurs, not for professional athletes. Of course the Olympics is a long way from only allowing amateurs to compete, and professional baseball is even further away from shunning trading in any form.

But still, there is certainly respect for tradition in baseball, and deceit for the sake of the task (hiding signals, stealing bases, etc.), loyal fans, fortitude, fatalism, hierarchy and so on.

But out of the pro sports, baseball least resembles a traditional battle for territory where strength and perseverance in the face of the opposition is required. To a large extent, baseball consists of specific tasks that don't involve direct contact with the opposition players and which are amenable to detailed statistical analysis.

In Moneyball, we see how the management of the Oakland A's takes advantage of the statistical nature of baseball to introduce rational commercial syndrome analysis in order to be efficient at the business of translating dollars into wins.

An early chapter, "How to Find a Ballplayer" outlines the clash between the traditional way of scouting and the new, disruptive, innovative approaches taken by the A's.

"Reason, even science, was what Billy Beane was intent on bringing to baseball."

"Billy had taken to saying, "We take fifty guys [in the draft] and we celebrate if two of them make it. In what other business is two for fifty a success? If you did that in the stock market you'd go broke."

"It was only baseball tradition that allowed scouting directors and scouts to go off and find the ballplayers on their own without worrying too much about the GM looking over their shoulders. And if there was one thing [scouting director] Grady knew about Billy, it was that he could give a fuck about baseball tradition."

It's not just tradition vs. innovation, there was also the related battle between guardian virtues of loyalty and presenting a united front vs.the commercial precept of dissent for the sake of the task

"The old scouts aren't built to argue; they are built to agree. They are part of a tightly woven class of former baseball players."

One of the key points the A's focussed on was to look at the actual factual record of each player's accomplishments rather than focussing on how much they 'looked' like an athlete, like someone you'd wanting fighting with you in a war, as opposed to someone who can stand in the batter's box and tell balls from strikes.

"Over and over the old scouts will say, "The guy has a great body," or "This guy may be the best body in the draft," And every time they do, Billy will say, "We're not selling jeans here"

A final element of the commercial syndrome was 'Collaborate Easily With Strangers and Aliens.' The first person to send the A's down the road of change was Sandy Alderson. In describing t
he difficulty in changing the way things were done, Alderson explained that, "I had credibility problems. I didn't have a baseball background."

So I found it interesting to see the same inroads made by innovation into the traditional way of doing things that Weber described in 'The Spirit of Capitalism' echoed so closely in a book about baseball.

But for all that, the most compelling part of Moneyball as entertainment is a chapter entitled, "The Human Element" which follows A's general manager Billy Beane as the A's, looking to set a record for consecutive wins, first take the lead in a game 11-0, then end up tied at 11 and finally win 12-11. Even in a story about the rational, commercially minded approach of investing in players who are productive, and being innovative and throwing tradition away and being efficient and thrifty, it's still the dramatic elements, the moments when rationality fails that draws us in and moves us. Moneyball works, but it's just business.

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Tuesday, April 19, 2011

88. All's Fair in Love and War

Note: This post is the eighty-eighth in a series about government and commercial ethics. Click here for the full listing of the series. The first post in the series has more detail on the book 'Systems of Survival' by Jane Jacobs which inspired this series.

"She cried, "Hold me back!
Hold me back, take away my gun
Hold me back, hold me back
Somebody won't you please hold me back
Don't let me do what must be done"

- Michelle Shocked - Hold Me Back

First question: What would cause a person to enter into a transaction that makes them worse off?

The most obvious possibility is that they didn't have a choice. Is someone pulls a gun on you on the street and takes your wallet, you have entered into a transaction that made you worse off, but you did it involuntarily. So transactions involving threats of violence are one possibility.

Another possibility is that a person gets tricked into making a bad transaction. For example, they bought something that turned out to be fake, or were promised something that never arrived. So fraud is another possibility.

And of course, people often do things that they themselves regret later. Even things that they know they will regret later as they are deciding to do them.

Now here's the follow-up question - in what cases are win-lose transactions beneficial to society?

Some might respond that taking something by force or fraud is never beneficial to society, but when faced with a situation where police are trying to capture a dangerous criminal or their military is fighting in a war, I think most people come around to the notion that there are situations where force and fraud are for the best and are morally justified.

The two examples above provide different cases for where we see the win-lose transaction as an overall benefit.

In the case of the police, we acknowledge that we are doing harm to the criminal, but we do so for the greater good. If a person has shown that they are willing to commit win-lose transactions that benefit themselves but hurt society (i.e. stealing) then we reason that the harm done by locking them up is outweighed by the harm prevented by keeping them from making more win-lose transactions.

Note that in order for this logic to work, the person doing the enforcing has to be strong enough to impose their sanctions on the criminal without effective retaliation. If criminals are able to retaliate effectively then our attempts to control crime will just lead to more and more violence. Only when someone can establish a monopoly on violence so that retaliation is futile can this cycle be broken. This was basically the main point made by Hobbes in Leviathan.

In a war, the reasoning is a bit different. Typically we rationalize the win-lose transaction in this case by simply not counting the impacts on our enemies in our calculations (or by calculating them with the reverse sign so that any harm caused to them counts as a good thing.)

True, any war effort usually has rationalizations that will justify it as being for the greater good (i.e. preventing the use of weapons of mass destruction), but the reality of war is that the calculus is generally in terms of our country not in terms of the total welfare of the two countries.

So in terms of modelling the win-lose transaction as a net benefit, I see two possibilities. One, based on an us vs. them distinction where we either don't count the harm caused to the other party or treat it as a good thing, and one where we count it, but we use an analysis of the total result over time to show that this particular harm is justified because it is outweighed in the long run by the benefits to society from causing the harm to the particular individual.

Of course, it is also possible that humans are programmed (genetically disposed) to take the former approach (treating harm to the enemy as a good thing) because it works out best for us overall.

A final case that I touched on earlier, is the case of a paternalistic decision where even though one person to the transaction wants to go through with it, another party prevents them from doing so because it is not believed to be in their best interest. For example, someone might want to ride their bike without a helmet but there is a law against that. Not because the person riding without a helmet is causing harm to others, but because we believe they may cause harm to themselves. As we saw previously, hyperbolic discounting (where people do things now that they will regret later) is a major cause of these sorts of situations. Of course trying to establish that society knows what's best for a person better than they do can be a tricky proposition. I'm not going into more detail on paternalistic transactions at this point (maybe in a later post), I just wanted to highlight them as another form of decision that might be regarded as 'win-lose' by some.

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Tuesday, April 12, 2011

Posting Will Resume Next Week

Until then...


Tuesday, April 05, 2011

87. Us and Them

Note: This post is the eighty-seventh in a series about government and commercial ethics. Click here for the full listing of the series. The first post in the series has more detail on the book 'Systems of Survival' by Jane Jacobs which inspired this series.

This week, I want to to look more closely at one of the most controversial precepts in the Guardian syndrome, 'be exclusive.'

How to model exclusivity in terms of game theory dynamics seems relatively straight-forward and we have encountered models that apply exclusivity already in discussing the strategy 'tit-for-tat' in 'The Evolution of Cooperation' or in the work of Brian Skyrms in 'The Stag Hunt'

In these models, exclusivity generally takes the form of 'cooperators' (people who choose the cooperative option in a prisoner's dilemma or stag hunt situation) who exclusively cooperate with other cooperators and will defect when they come up against a defector. Naturally this raises questions about how to identify who will cooperate and who will not. It's a thorny enough issue that the famous Lensman sci-fi series by 'Doc' Smith was even named after the device (the 'Lens') that the good guys employed to tell who could be trusted in their fight against the bad guys.

The benefit from appropriate exclusivity is obvious - putting your trust in people you can trust is beneficial while putting your trust in people you can't trust is not.

But despite the obvious benefits, exclusivity is a controversial precept, primarily because, unlike in the hypothetical world of David Gauthier, people don't wear sweatshirts that identify their trustworthiness, so people fall back on measures that are hard to fake such as religion or skin colour.

To see how controversial this is, I'm going to take the example of the closing essay from 'Moral Sentiments and Material Interests' (previously discussed in this series here), "Social Capital, Moral Sentiments and Community Governance by Samuel Bowles and Herbert Gintis.

The gist of this essay is that neither an all powerful government nor a completely unfettered marketplace will lead to optimal economic outcomes and that community governance based on appropriate moral values can often fill in where government and markets fail.

They state that,
"in contrast with states and markets, communities more effectively foster and utilize the incentives that people have traditionally deployed to regulate their common activity: trust, solidarity, reciprocity, reputation, personal pride, respect, vengeance, and retribution, among others."

Of course, that's a nice list of guardian syndrome precepts, which Jane Jacobs observed were generally respected within the ranks of government and contrasted with an opposite commercial moral syndrome, so the positioning of community by the authors as some mid-point on a line that runs from socialism to laissez-faire seems a bit off. They do admit, later on, that the state and community groups need to work together since the state has enforcement powers that community governance groups typically lack.

Gintis and Bowles go on to talk about how it's not just states and markets that can fail, communities can fail too.

"A second 'community failure' is less obvious. Where group membership is the result of individual choices rather than group decisions, the composition of groups is likely to be more culturally and demographically homogenous than any of the members would like, therefore depriving people of valued forms of diversity. To envision this scenario, imagine that the populations of a large number of residential communities are made up of just two types of people easily identified by appearance or speech, and that everyone strongly prefers to be in an integrated group but not to be in a minority. If individuals sort themselves among the communities, there will be a strong tendency for all of the communities to end up perfectly segregated for reasons that Thomas Schelling pointed out in his analysis of neighbourhood tipping. Integrated communities would make everyone better off but they will prove unsustainable if individuals are free to move."

To me, it's not clear how integrated communities will make people better off if nobody wants to be in a minority, but my point is that the authors see exclusiveness as similar in nature to 'white flight1' and believe that diversity brings self-evident benefits that people are expected to want and get value from.

The authors go on to describe four key elements of a good governance package for communities, the fourth of which is described as follows:

"active advocacy of the conventional liberal ethics of equal treatment and enforcement of conventional anti-discrimination policies. That is is not unrealistic to hope that communities can govern effectively without repugnant behaviours favoring 'us' against 'them' is suggested by the many examples of well-working communities that do not exhibit the ugly parochial and divisive potential of this form of governance."


"Other ways of empowering communities can be imagined, but some should be resisted on grounds that they heighten the difficult tradeoffs between good governance and parochialism2 mentioned in this chapter. For example, Alesina and Le Ferrara found that among United States localities, participation in church, local service and political groups, as well as other community organizations is substantially higher where income is more equally distributed, even when a host of other possible influences are controlled. Their findings suggest that policies to increase income equality would enhance community governance. But they also found that racially and ethnically diverse localities ... had significantly lower levels of participation. One may hope that pro-community public policy would not seek to increase racial and ethnic homogeneity of groups for this reason."

It's not clear to me how this empirical result squares with the theoretical argument earlier that people are better off in a diverse community, but more importantly note how it is automatically assumed by the authors that the value of diversity outweighs any gains to be made from participation in church, local service and political groups.

Later on the essay has a nice series of quotes from Edmund Burke, Alexis de Toqueville and Mark and Engels all lamenting how commercial morality was replacing guardian morality.

"The ago of chivalry is gone. That of Sophisters, economists, and calculators has succeeded."

de Toqueville:
"as for the rest of his fellow citizens, he is close to them but he sees them not .. he touches them but feels them not; he exists but in himself and for himself alone."

Mark and Engels:
"The bourgeoisie ... has put an end to all feudal, patriarchal, idyllic relations ... and has left remaining no nexus between man and man than naked self-interest ... In place of the numberless indefeasible chartered freedoms, it has set up that single unconscionable freedom - free trade."

The authors argue that instead of looking to past systems of values, community governance will thrive if it can solve practical problems today (they don't mention the possibility that this may be one and the same thing) or reference their earlier list of moral values that the community uses to help it achieve solutions to modern problems), but it seems ironic that, having said that, they fail to acknowledge that the biggest stumbling block towards community governance, by their own acknowledgement, is their moral value which puts the value of diversity ahead of the gains from a homogenous community.

Anyway, as with the entire book, the essay is well worth reading, although, I did find the closing paragraph oddly hesitant:

"If we are right that communities work well relative to markets and states where the tasks are qualitative and hard to capture in explicit contracts , and where the conflicts of interest among members of society are limited, it seems likely that extremely unequal societies will be competitively disadvantaged in the future because their structures of privilege and material reward limit the capacity of community governance to facilitate the qualitative interactions that underpin the modern economy."

In the future? Latin America exists now, and has been around for quite a while in its highly unequal and 'competitively disadvantaged' state. I don't think we need to wait for the future to test this theory.

1As an aside, a quick glance at the NY Times interactive census map shows that white flight is an ongoing phenomenon in most of the U.S.

2Notice the religious origin of the word 'parochialism' which evokes a
combination of exclusivity and respect for tradition.

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