Priceless

William Poundstone's Priceless: The Myth of Fair Value (and How to Take Advantage of It) must be among the better books I've read despite its somewhat misleading title.

At first glance, one is led to believe that Priceless is fundamentally about price theory and how to make better pricing and/or purchasing decisions. On that score, it is and it isn't. To his credit, Poundstone's work indeed offers fascinating insights on pricing and economic decision-making. Yet outside of select chapters where these are explicitly spelled out, the book does so in a roundabout manner, leaving it mostly to readers to draw their own relevant inferences on the subject.

The reason for this is that Priceless is really two different books in one. The first part recounts the development of the field that would eventually become known as behavioral economics, from its roots in psychophysics to the contributions of two individuals who would become the field's oft-cited luminaries, Daniel Kahneman and Amos Tversky. Thereafter, the book shifts gears to discuss price psychology in a variety of different contexts, such as menu design, the real estate market, and jury-awarded punitive damages (to name but a few).

Personally, I enjoyed the book. To a large degree this owes to that course on experimental economics I took a couple of years back, where Kahneman and Tversky's research on Prospect Theory was required reading (and arguably the best thing I read all that semester). But apart from that, what's great about Priceless is that it is perhaps the most comprehensive reader on behavioral economics available today, chock full of stories about priming, anchoring, ultimatum games and other quirky economic experiments bound to catch the inquisitive reader's fancy.

It wouldn't surprise me if Poundstone's book quickly becomes required reading (and an instant classic) in the behavioral economics literature. That is, provided one knows she's getting something a little different than what she bargained for in Priceless.

The Philippine Legislature [Presentation Thursdays]

A slide deck on the Philippine Legislature, based on Article VI of the 1987 Constitution:

View this presentation on Slideshare.

As noted previously, provisions pertaining to the legislature actually precede those of any branch of government, as appropriate for a democratic republic. This fact seems to surprise most students, who assume that the Executive branch takes primacy given the importance accorded to the Office of the President.

In this regard, the slides themselves are a straightforward (albeit aesthetically-challenged) account of the qualifications, responsibilities and powers of a sitting member of Congress. Speaking of which, in the two years I taught this course it never became tiresome to quiz students about whether Philippine Senators also count as Congressmen (as members of the lower house are called; answer: they do).

The slides end with a diagram of how bills become laws, which has always been helpful for students. Looking back, I think it would have been more interesting (if time-consuming) to simulate this in class, and knowing what I know now I wish I'd come up with a cleaner and simpler diagram, but the slides served their purpose well enough.

[About Presentation Thursdays: Every now and then, on a Thursday, I post a presentation from my archives and include some accompanying commentary not just about the content but also my thoughts on designing it. The presentations can also be viewed and downloaded from my Slideshare page]

Avoid Failure #2

There are two kinds of failure.

The first we're all familiar with: you try, you fail. Maybe the idea was inane. Maybe you tried your hardest but luck wasn't on your side. Maybe the deck was really stacked against you. Regardless, it stings to have stuck your neck out that way, to leave yourself vulnerable like that, to open the door for people to laugh at you, and ultimately fail.

The second we're also familiar with. It's when we think about all that could go wrong when faced with a new opportunity that we're blinded to what can go right. It's when we're prodded to get out of our comfort zones and in the process see crisis, calamity and disaster. It's when you decide against running because you imagine how hard the course is going to be. It's when you forego sending in your resume because you decide you don't have a shot. It's when you opt not to bet on your business idea because in your mind's eye that business you haven't even started has already gone bankrupt.

The former hurts but it's the latter that's really fatal: failure before you've even tried. Its nothing more than anxiety, which Seth Godin acutely describes as merely failure experienced in advance. It's self-defeating: give in to anxiety and it will suck out your very will to succeed.

Nobody likes to fail. But worse than failure is never having even tried.

Life Balance Sheet

Click the image to embiggen. Just a little something that came to mind. I'd say it's worth thinking about.

I'm not an accountant, so if anyone has suggestions how to improve it (besides working on my handwriting), let me know.

Predictably Irrational

One of the first classes I signed up for when I got to grad school was for a course on "Experimental Methods in Finance". The course aimed to demonstrate how basic principles in finance (and by association, economics) could be understood through carefully designed experiments. The punch line, of course, was that the terminal requirement involved each student designing a financial experiment, putting this together as a paper that we would present to the class.

Even if we didn't have to actually run the experiment, this was a challenge for me. Not having much experience in finance prior to then, I went about this requirement the only way I knew how: by hitting the books and reading up on other financial experiments (using the bibliographies of our class readings as my starting point). In the end, I settled on proposing a modification to a simple experiment I found in the literature, and thereby ended up doing rather well for myself in the process.

Looking back, I wish Dan Ariely's book, Predictably Irrational, had already been published. If it had been, it would have been a huge help at the time, and I suspect I would have been able to think up a much better experiment than I eventually did.

The subtitle to Predictably Irrational reads "The Hidden Forces that Shape our Decisions." Indeed, what Ariely sets out to describe in the book is how human decisions oftentimes consistently deviate from the "rational" models outlined in traditional economics texts, recounting the results from a variety of economic experiments he and his colleagues have conducted in a variety of settings. As the title suggests, the conclusion he draws from these is precisely that there is a certain predictability to how irrational human beings can be, from which we are made to infer that the "rationality" often invoked in mainstream economic thinking can be seriously flawed.

Ariely is one of the foremost behavioral economists of his generation, and this book demonstrates why. It is very accessible reading material for what could potentially be a rather esoteric subject, describing experiments that aim to examine placebo effects (they're real), how people react to prices are reduced to "free" (everyone loves free chocolate, don't they?), and whether being reminded of the Ten Commandments induces people to behave honestly (it does!), among others. Granted, not all of these pertain to matters immediately within the ambit of the economics profession; nonetheless, the description of these experiments can be fascinating and does help serve the broader point that human beings may very well be predictably irrational.

At the same time, Predictably Irrational also demonstrates what I consider the shortcomings of economics by experimentation. For instance, one set of experiments described in the book involved understanding how people behave or make decisions when they are sexually aroused. I took exception to this, first owing to what the experiment entailed in terms of what willing volunteers were asked to do , and second because it seemed like an experiment that wanted to be provocative for the sake of being so. Call me prudish, but I think there are some lines that just shouldn't be crossed even in the name of science.

Furthermore, later parts of the book (mine is the updated and expanded edition), where Ariely offers his two cents' worth on the recent financial crisis, are arguably the weakest in Predictably Irrational. This is not because Ariely is a bad economist -- which he's not -- but because it comes across as a token attempt to be current. The best parts of the book were precisely those that involved describing the different experiments Ariely and his colleagues thought up and the oftentimes surprising results that ensued. But to go from those insights to commentary about world affairs? That seems a bit of a stretch -- to me, anyway.

Which, I think is the point. Looking back at that first grad school course I signed up for and the economic experiment it made me think up, what I appreciated the most was knowing that whether or not the result conformed with economic theory I would learn a little more about people and markets in the process. I did, and I feel all the better for it. In much the same way, that's how I feel about Predictably Irrational.

XIII

After several years in the making, Final Fantasy XIII is the franchise's first outing on the current generation of consoles -- and one that is quite impressive.

Not that it's without flaws. In fact, a fair share spring to mind, many of which have already done the rounds on the internet. But these blemishes notwithstanding, FFXIII remains an excellent JRPG for either the Playstation 3 or Xbox 360.

It's easy to be stunned by how gorgeous this latest Final Fantasy installment looks and feels. Visually it's superb: with smooth transitions between in-game graphics and the more carefully rendered CGI cutscenes, it's easy for one to forget that one is actually playing a game and not just watching. Further, the game boasts of another well composed musical score, though western audiences have the misfortune that the original Japanese theme song was substituted with a Leona Lewis single. Boo.

Most people invest in a JRPG for the story, and FFXIII's is rather strong up to a point. Its setup gives the game an unmistakably epic feel, both in terms of its token fantasy elements -- magical beings, two worlds at war, a cool if quirky cast of characters, fates intertwined and destinies to be revealed -- and how the plot unfolds. Players are thrust smack into the middle of events with flashbacks (quite effectively), allowing the broader picture to unravel piece by piece. Admittedly, the game is perhaps the most linear compared to most of its predecessors, and there does come a point where an already complicated but otherwise enjoyable story starts to lose its coherence. Yet the first is a tradeoff in favor of storytelling that works well enough, while the second may very well be a failure of localization more than anything else.

Cool also that this thirteenth installment in the series unfolds in thirteen chapters revolving around events that occur across thirteen days. Natch.

In terms of gameplay, FFXIII strikes a nice balance between traditional turn-based JRPG fare and a more action-oriented RPG format with its active time battle (ATB) gauge and paradigm system mechanic. As a throwback to past Final Fantasy installments, players have to wait for a gauge to fill before performing actions; yet the dynamic here is that commands are meant to be queued while waiting. However, one only really has control over the party leader; remaining party members are computer-controlled and execute commands based on the roles -- Commando, Ravager, Sentinel, Saboteur, Synergist or Medic -- they are assigned. Hence, combinations of roles, or paradigms, and the ability to shift between paradigms give the game some measure of variety and customizability, albeit at the expense of added control.

Much has been written about how the game "opens up" late into the story (after between 25 to 35 hours of gameplay), allowing players to finally go exploring, perform sidequests and level up the characters. This is a welcome break for the game, and perhaps should have been incorporated sooner, but also one where the tradeoffs in game design begin to grate on players. It's unfortunate, for instance, that there are so many throwaway animations between actions -- enemy encounters, riding chocobos, etc. -- that are either unnecessary or otherwise throw of the fluidity of the game. Overpowered monsters and enemies, the difficulty of leveling up with ease to match them, as well as how much time is consumesd just moving around to get things done clearly make the game much longer than it need be. Even token elements of Final Fantasy -- such as Tonberries, Cactuars, not to mention Eidolons themselves -- often come across as excesses that need not have been thrown into the mix, even if the intention were to please the loyal faithful.

That, too, may very well be an appropriate way of describing Final Fantasy XIII on the whole: loyal to its roots, pleasing to a fault, but occasionally a bit much. Yet with its stunning visuals, interesting gameplay and mostly compelling story, it's as great a ride and grand an adventure as any installment of the series has been, if not more.

Blame the Computer [The Internet is Down]

Quirky! Love the Bobblehead. And yes, blame the computer whydontcha?

This one from Vanity Fair online comes courtesy of supergirlhero13, whose birthday also happens to be today! Happy Birthday!

[Confused about The Internet is Down? Then check out the whale.]

Vote 2010

Aquino?

Estrada?

Gordon?

Madrigal?

Perlas?

De los Reyes?

Teodoro?

Villanueva?

Villar?

Pilipinas?

Yes.

The Philippine Presidency [Presentation Thursdays]

Here are two sets of slides on the Executive Branch of the Philippine government.

This first set covers the relevant provisions pertaining to the Executive in the 1987 Philippine Constitution (Article VII):

View this presentation on Slideshare.

The slides are mostly self-explanatory. However, I did omit an interactive diagram that describes the line of succession in case the office of the President becomes vacant (the diagram wouldn't have displayed well on Slideshare). The contents of that omitted slide were as follows:

• Should the position of President become vacant, the Vice-President shall assume the Presidency. In such a situation, the new President shall select a new Vice-President from Congress.
  
• Should both the positions of President and Vice-President be vacant, the Senate President (or in his absence, the House Speaker) shall become the Acting President.
  
• In the latter instance, Congress will have to draft procedures pertaining to how a President and Vice-President will be elected to fill the position.
  

Of course, these constitutional provisions regarding the Executive Branch merely describe things as they should be. Taking into consideration Philippine political culture, the dynamics surrounding the Presidency become all the more intriguing. With this in mind, I prepared the following slides (slightly updated) to impart as much to my students, drawing on material developed by respected scholars Alex Brilliantes and Randy David:
 

View this presentation on Slideshare.

One final note: the Constitution actually presents the Legislative Branch of government prior to the Executive Branch, which was also how the faculty structured the syllabus of the class for which these slides were prepared. After all, the Philippines is a republican democracy, the cornerstones of which are representation and the rule of law. Yet with the 2010 Presidential elections but days away it seemed appropriate for me to post these slides instead.

[About Presentation Thursdays: Every now and then, on a Thursday, I post a presentation from my archives and include some accompanying commentary not just about the content but also my thoughts on designing it. The presentations can also be viewed and downloaded from my Slideshare page]

Willing and Able

My dad likes to use the above diagram when he gets philosophical about hiring and working with people. It's not too hard to figure out, but it is a helpful framework for businesses.

Strictly speaking, dad has only two criteria for hiring: a.) he must like the candidate in question and b.) the candidate must be capable of doing the job. After all, there's no point hiring someone you don't want to work with, and if the person can't get the job done anyway, pretty soon you won't much like him/her.

Having said that, evaluating a person's performance boils down to both attitude and aptitude; that is to say, their willingness and ability to do what they were hired to do. As the diagram describes, people tend to fall into any one of the four categories:

• Willing and Able. These are the best people to work with and, by definition, are or can be assets to the organization, and thus are very much worth keeping. (Top-left box.)
  
  
• Unwilling and Unable. Yes, there are such people. Let's face it: sometimes people apply for a job they don't particularly want or aren't even qualified for. Whatever the reason, these kinds of people should be avoided at all costs; but if they happen to make their way into an organization, odds are they won't last for long. (Bottom-right box.)
  
  
• Able yet Unwilling. Some people are very talented and quite qualified, yet just don't have the motivation to do a job well, if at all. (Top-right box.)
  
  
• Willing yet Unable. On the other hand, there are those who simply do not have the skill set required to get the job done, yet are deeply committed to trying as hard as they can.
  

Of the four, the first two are the easiest to pass judgment on. Managers should hire and work to keep people that are willing and able; meanwhile, it's inevitable that anyone unwilling and unable will fall by their own weight at some point.

However, the hardest to pass judgment on are the "yets": the able yet unwilling and the willing yet unable. Consider the former: it's tempting to think that with the right attitude adjustment or the right incentives (carrot or stick), such individuals might still be useful to an organization. This may work for a time. But at some point it will be much more attractive to simply look for persons willing and able to do the job rather than pull teeth working with someone able yet unwilling.

On the other hand, willing yet unable people are a conundrum. Such individuals can be the most committed and the most motivated to the organization but have are unfortunately outclassed (or Peter-principled) and fumble the tasks they're assigned. Can they be trained to be better? Maybe, or at least up to a point. They're like the walking wounded (as dad calls them): though raring for battle, sometimes it's for their own good to stay on the sidelines.

Of course, there's a larger point to all this. Inasmuch as the above is a useful framework for managers to evaluate staff or job candidates, it is equally useful to ask ourselves the question: in which box do we belong?