Tag Archives: Trends

Malcolm Gladwell is Often Wrong

I’m a little late in getting to this, but a semi-recent suite of letters to the editor regarding Malcom Gladwell’s New Yorker piece on basketball’s full court press provided me with a reason to write something I’ve been stewing over for years: Malcom Gladwell is massively overrated. I have been disagreeing with him for years, since before he published The Tipping Point, back when he was just a New Yorker staff writer.

The letters about the full court press, which sadly are not on the New Yorker website, generally press [heh heh] on the theme that Gladwell’s conclusion was superficial if not downright specious. This makes sense to me, since when I read his article, it clearly seemed to be wrong. And that has been my problem with Gladwell all along: too often I feel like his conclusion doesn’t make sense.

I should state here that I don’t want to fully attack Gladwell. Sometimes his conclusions are correct. And in all cases I think he is a truly talented writer with an amazing skill at explaining complex ideas in clear and concise language. He just sometimes leaps to unwarranted conclusions.

Here is how the typical Gladwell article works: he presents a few facts, which he then links into some sort of “surprising” conclusion (e.g. underdogs should always press or a few well-connected hipsters started the Hush Puppies trend) and then does a series of riffs on the implications of this conclusion. But his conclusion is based on some analysis he has done of those first few facts. My problem is that he never gives you the details of this analysis or how he did it. That means that you can’t tell if he’s right or not. He might have misread the data, or skewed it to fit his thesis, or just screwed the analytical pooch. You have to trust his analysis, and if you don’t, his whole article is meaningless.

The real problem here is that Gladwell’s analyses are sometimes wrong. As the letters indicate, his view of the press is flawed. Of course any new strategy can prove effective for a while, but fundamentally all a press does is move the locus of competition from the basket to the backcourt. Once teams get used the press, the good teams will break it the same way they can outscore the bad teams once under the basket. In addition, as the letters pointed out, it is often the favorite that presses, leveraging its physical advantage.

Similarly, Gladwell’s first — and still most famous — analysis, in The Tipping Point, is equally problematic. Recent research in trends has shown that that randomness and social dynamics provide a full explanation for why some trends explode and some don’t. Gladwell’s whole structure of Mavens and Connectors is irrelevant. Check out Duncan Watts’ work on music popularity to see how wrong Gladwell really was. See links here, here, here, here and here.

Here is Watts from the NY Times magazine: “This means that if one object happens to be slightly more popular than another at just the right point, it will tend to become more popular still. As a result, even tiny, random fluctuations can blow up, generating potentially enormous long-run differences among even indistinguishable competitors.”

As statisticians always say, just because the data looks like a trend doesn’t mean the trend exists. Gladwell’s problem is that he likes to make a thesis out of a few data points, without doing the work to truly understand whether his thesis actually has causative properties.

Or, as MIT professor Ezra Zuckerman put it in a letter to the New Yorker regarding Gladwell’s piece on the Wall Street meltdown, “This is an interpretive leap drawn from two facts….But Gladwell’s logic is faulty.”

I want to emphasize again, however, that I am not fully anti-Gladwell. His writing is great, even if his analysis is sometimes flawed. And his review of Free, the idiotic book by Chris Anderson, is right on the money. So to speak.

Francis Fukayama Redeems Himself

Francis Fukayama may have restored his reputation, at least with me, by writing an article in Newsweek recently in which he was actually right. Fukayama, a professor at Johns Hopkins, is probably best known for writing The End of History, in which he claims that liberal democracy has won and is dominant. He was also an early supporter of George W. Bush’s Iraq invasion, providing intellectual justification from a non-Pentagon neocon that was essential to selling the war.

But Fukayama was so wrong on both counts that I was beginning to think that maybe he taught at Johns Hopkins preschool rather than the University. His Newsweek article, however, is possibly the best summary I’ve seen of where the US has gone wrong over the past several decades. To summarize his summary: the Reagan revolution was about A) lower taxes and less government; and B) supporting liberal democracy worldwide. We’ve gone too far on A, as demonstrated by the current financial crisis, and we’ve ruined B by doing it at gunpoint rather than through persuasion. Rather than adding more commentary, I encourage you to read his article here.

Seth Rogan and the Mortgage Crisis

Professor Gary Cross, of the University of Pennsylvania, has a new book out, called Men to Boys: The Making of Modern Immaturity. In it he traces concepts of adult masculinity from Victorian gentlemen to the man in the gray suit of the 1950’s through the deconstruction of tradition in the 1960’s counter culture and culminating in the modern boy-man, exemplified by the genial slackers portrayed by Seth Rogan in virtually every movie he has ever been in.

What does that have to do with the mortgage crisis? I place Professor Cross’ cogent analysis in a broader context of evading responsibility, which has become more and more the American paradigm during the period Dr. Cross analyzes. As men have transitioned from working downtown to getting stoned while they play video games…

….so too Americans have transformed themselves from a thrifty nation of hard workers into a society of debtors who leapt at the “free money” given them by cheap mortgages and (falsely) rising house prices.


Source: Bureau of Economic Analysis

And while Mr. Rogan’s character in Knocked Up became responsible toward the end of the film, it took the crisis of Katherine Heigl’s pregnancy to force that maturation. In the same way, not until this year’s financial crisis did Americans recognize that they were living beyond their means. They would have continued to toke at the mortgage-backed bong, one hand on the joystick and the other in the Cheetos bag, had not Fannie and Freddie’s financial water suddenly broke, uncomfortably thrusting us all into mandatory adulthood.

Post Scripts

None of this should be taken as an attack on Seth Rogan himself. He is clearly way too busy to actually be a stoned slacker, and I’m sure he now has more than enough money to support several giant mortgages.

Also, lest you think Professor Gary Cross is something of a dilettante, you can download his extensive publication list from the Penn website. Full disclosure, however: he is a fellow graduate of Harvard Divinity School, so I tend to support him.

Income Inequality

It isn’t often that I read two articles about income inquality in one day, let alone in publications as disparate as the Wall Street Journal and Harvard Magazine. But yesterday was just such a day, and it inspired me to write about these two articles.

First, the WSJ reported on some new IRS data . According to this data, the number of people with a net worth of $20 million or more was 47,000 in 2004, the most recent year for which data was available. This figure is up 62% from 1998. Other data showed that to be one of the country’s top 400 earners in 2005 you needed to earn at least $100.3 million, up from $74.5 million just a year earlier.

Then Harvard Magazine did a long survey of research by various Harvard professors on income equality and its impact on people and society. There was so much in this article that I don’t even need to comment. I am merely going to summarize some key findings and encourage you to read the entire article, which is available free online.

A) The share of total national income earned by the top 1 percent hit an all time high of 21.1 percent in 1928 — the heart of the Gilded Age. It dropped steadily to 10 percent in the 1960’s and 1970’s. In 2006 it reached 20.3 percent.

B) Americans at the 95th percentile of income or higher can expect to live nine more years than Americans at the 10th percentile or below.

C) On the Gini scale of inequality, which runs from 0 (totally equal) to 1 (Bill Gates owns it all), the US rating rose from .35 in 1965 to .44 today. Other countries around .4 include Russia and Mali.

D) The average CEO made 25 times what the average worker made in 1965. Today it’s 250 times.

E) States with the largest black populations have the least generous welfare systems.

F) In 1950 average public college tuition was 4 percent of median family income. In 2005 it was 11 percent.

There is both additional data and analysis in the full article. The article does not, however, show the methodology behind any of these studies. But I will note that all the studies were done by Harvard professors, who are generally pretty good at this stuff.

A New American Sense of Responsibility?

Over the past few months I have seen more and more data indicating that Americans are cutting back their consumption in the face of the deteriorating economic situation. Retailers, restaurants, car companies, airlines – it seems as if everybody is feeling the pain. Just last week the Wall Street Journal called the trend “U.S. Retools Economy, Curbing Its Thirst for Oil.”

I am wondering if maybe this trend will last beyond the current economy and represent a new, or renewed, sense of responsibility in America. The past few decades have been an orgy of consumerism in America (and much of the developed world, but I’ll focus on America simply because I know it best), as people lived beyond their means, purchasing things they didn’t need and couldn’t afford. Possibly the best quote I have heard on this trend came from Art Wong, a worker at the port of Long Beach, who was on NPR’s Marketplace:

You know, we’re being stretched, and I turn to my kids every so often and I ask them, how many more pairs of jeans do they need? How many more handbags can they buy? And how much room do they have in their closets? And they keep going, and they keep buying, and the port keeps seeing more and more cargo coming through here.

This consumption frenzy brought with it a number of problems. There were environmental considerations, both from the production of consumer goods and from the gasoline sucked down by the SUVs that were a major outlet of purchasemania. There were price dislocations from people purchasing items (homes, Tiffany bracelets, fancy meals) that they couldn’t afford. There were macroeconomic impacts as we financed our purchases with overseas capital. Finally, I think there were moral and psychological consequences (not surprising to regular readers of this blog) from an entire population giving up on any sort of self-restraint or thought for the future.

With gas prices above $4 per gallon and economic growth stagnating, our reduced consumption is not surprising. But maybe, just maybe, this decline in purchasing represents a broader change, a sense that untrammeled consumerism is simply unsustainable. Perhaps people were jolted awake by the impact on the environment, or the national security ramifications of our addiction to oil, or the deflation of the housing bubble. Are Americans now looking beyond their own material wants?

Maybe, and maybe not. Perhaps there is no broader sense of responsibility, but rather the inexorable force of economics. Maybe people still don’t care about the environment or national security, and all they really want is a bigger Jet Ski, but they simply no longer have the money to satisfy their wants. That is certainly what the economists think. “We’re going back to the good old days of living within our means,” said David Rosenberg, chief North American economist for Merrill Lynch. Adds another:

We’re seeing the birth pangs of a new economic structure,” said Neal Soss, chief economist for Credit Suisse First Boston. “The next year or two or three will be about the transition to a new equilibrium. Consumption by households will grow more slowly than their incomes, which is the exact opposite of the last 25 years when consumption grew faster than incomes.”

Although I would prefer to think that we are getting more responsible, and that issues larger than our checkbook are driving these new spending patterns, I suspect that A) the economists are right; and B) it may not really matter. Even if economics are behind the change, those economic conditions show no signs of changing in the near future, or possibly the medium future. There is even a theory that this shift is permanent, and that America’s days of being an economic powerhouse are over. “The world has become multipolar,” according to UC Berkeley economist Barry Eichengreen. “Our dominance will decline.” Jared Diamond, of Guns, Germs & Steel fame, even says that the developed world only has 30-50 years of first world living before we outstrip our own resources.

Either way, this change in spending, this “retooling of the economy,” looks like it will be with us for a while. This has tremendous implications for companies that sell to consumers. Think about:

  • Utilities dealing with decreased demand for energy
  • Car companies finally forced to produce smaller cars
  • Construction with a focus on energy efficiency and green materials
  • Appliances that are cheaper, smaller and use fewer resources
  • Consumers actually turning down credit card offers because they aren’t buying things
  • Retailers changing their product assortment
  • Discounters (Wal-Mart) gaining market share at the expense of stores that catered to the overreachers (Neiman-Marcus)

Convenience Consumption, Part 2

Just a few days after finishing my entry on convenience consumption I read in The Atlantic a great article by Virginia Postrel on what she termed “inconspicuous consumption.” She explores the works of several economists who show that spending on visible consumption goes up as neighborhood income goes down. In other words, people in poor neighborhoods are more likely to buy flashy cars and watches than people in wealthy neighborhoods.

Postrel notes that when Veblen was writing in 1899, America was a much poorer country than it is now, so the wealthy wanted to show off. But now, the wealthy have already established themselves, so it’s the better off among the poor who engage in the most conspicuous consumption. She quotes Euromonitor:

“Bling rules in emerging economies still eager to travel the status-through-product consumption road….[but] bling isn’t enough for growing numbers of consumers in developed economies.”

This plays right into my thesis of convenience consumption. The upper class no longer needs to display its wealth, so it displays its importance, as measured by convenience. Gaudy bling has been left to the hoi polloi while the upper class focuses on Fiji water and packaged meals from Whole Foods.

The Everyday Social Contract

The concept of a social contract is not a new one. Theories of society as a collective agreement between its members have probably existed since people first began living in groups. Certainly Plato discussed society’s contract, and Rousseau’s biggest claim to fame is his 1762 book The Social Contract. The big social contract takes the form of following laws and voting and supporting the military and other major responsibilities of citizenship.

But we also enter into minicontracts every day, unspoken rules or little rituals and commitments whereby we all have to play our role to make the whole go smoothly. As an example, when you get on a city bus you effectively enter into an everyday social contract to cooperate with other passengers to make the ride work.

When you get on a city bus, you start looking for a seat. If the front seats are taken, you move to the back. If you see that all seats are taken, so you’ll have to stand, you should also move to the back. We all know this, and if we forget, we’re reminded by the driver, who continually yells “move to the back.” The only way a city bus can fill up to carry all the passengers who want to ride is for standers to keep moving back. But if even one person violates this everyday social contract, the system falls apart. If one person stands in the middle of the bus instead of the back, then nobody can get past that person, and the whole back of the aisle is empty. The back of the bus is bereft of standers, while a zillion people are crowded into the front half. How many times have you been on a bus like this, or even seen it pass by you, refusing to stop because the driver thinks it’s full, when you can see room for 10 more people in the back?

There are many other examples of everyday contracts: behavior on elevators, noise in apartment buildings, driving (go fast in the fast lane, etc.) and, of course, everyone’s hottest button, using cell phones in small spaces. In some ways, we can see the larger social contract of society as being made up of all these everyday contracts. And with these everyday contracts, one violator can cause problems for every other person who signs the contract. The question is how we keep people from violating the terms of their contract. Any ideas?

Eventually We’ll All Be Environmentalists

Environmentalism is generally represented as some version of dichotomy: conservative v. liberal or business v. environmentalists or republican v. democrat. Probably the most common characterization is that corporate executives don’t want to spend money to clean up while liberals want businesses to be clean and green: in other words, profit v. the environment

This dichotomous presentation has historically made sense, and if you look at environmental battles in the past, this is how the lines have often been drawn. For examples, see loggers v. the spotted owl or coal mines v. health advocates.

Health advocates, however, are the crux of a coming change. As the environment degrades and as science discovers more links between pollution and health, environmentalism will be seen less as an earth and animal issue and more as a human health issue. Many companies are perfectly happy to prioritize profits above trees or animals or scenic views, but they are much less likely to put profits ahead of human lives.

As the science become clearer and activists get better at using that science, the link between corporate actions and human health will become more explicit. This will cause corporate chieftains to look at things differently: they are, for the most part, decent people, and they don’t want to kill or injure other humans. And even those chieftains who might choose profit over the lives of others (they’re the ones who make great movie villains) certainly don’t want to get caught valuing money over human lives – that would be bad for business.

To use a concrete example, coal mining creates pools of toxic sludge. In West Virginia, some of these pools sit near schools. One mine, owned by Massey Energy, has a 2.8 billion gallon sludge pool sitting 400 yards above an elementary school. If science were to demonstrate that the fumes from this pool are damaging to the health of the school kids, I reckon that Massey CEO Don Blankenship would look into doing something about it. Mr. Blankenship probably doesn’t want to kill kids, and he definitely doesn’t want the world to know if he does kill kids.

Moreover, as global warming become more widely accepted as fact, this problem will hit closer and closer to home for corporate chieftains. Because if the climate starts to change, it won’t be random kids being hurt; it will be the chieftains’ kids, or grandkids. And NOBODY wants to hurt their own grandkids.

Flip-flops and Long Pants

I was driving the other day and saw a woman waiting to cross the street wearing work pants – slacks, or trousers, or whatever you want to call them – with flip-flops.

Her pants were long, so they dragged on the ground as she walked. This is not an uncommon sight; I see a woman similarly dressed several times a day here in downtown San Francisco. I asked my friend Lisa, who was in the car, to explain. “Well, long pants are very stylish for women right now. Of course, they need to be worn with high heels to look right. But high heels usually hurt like hell, so we wear flip-flops to and from work.”

That seemed logical, and Lisa is my definitive source on such matters. “But,” I queried Lisa, “I see that all the time, and it totally frays the pants. What do women do about that?” Lisa looked at me as if I were a moron (not the first time she gave me that pitying look, by the way) and declared “they get new pants.”

I had always been annoyed by the flip-flop with long pant look, but never really knew why. Maybe it was the discordance of combining beach wear with work wear. Maybe I’m just compulsive enough that the dragging hems vexed me. But during my conversation with Lisa, distaste crystallized into theory. I began to see this look as emblematic of something more than just fashion; I saw it embodying a troubling aspect of our society.

Allow me to explain. The woman I saw crossing the street – let’s call her Sarah – wants to be fashionable, so she wears long pants. But long pants demand high heels, which hurt. Yet Sarah wants to be comfortable too, so she switches out the high heels for flip-flops whenever possible. She wants fashion AND comfort. There is a cost to Sarah having her cake and eating it too: frayed pants. But that cost doesn’t faze Sarah, since she can always buy new pants.

Sarah is like America: she wants to look good and feel good, and damn the consequences of having it all. She refuses to suffer even a modicum of discomfort for her style, and solves her dilemma by overspending, throwing away pants that cost more than the entire wardrobe of much of the world.

In many ways beyond fashion, America wants to have it all. We want to drive giant SUVs yet not pay much for gas. We want our taxes cut yet our services increased. We want cheap and easy mortgages yet our bank deposits to be safe. I personally want to date supermodels who are also nuclear physicists. But in each case the reality is that we can’t have it all.

As a final little fillip to this flip-flop entry, yesterday’s Wall Street Journal had an article on a California legislator who is trying to ban helium-filled mylar balloons because they float away and can short out power lines or kill sea animals who swallow them. The party planning industry is fighting the ban. Says one party planner of her clients: “everybody wants something high-end and glitzy.” Exactly. They want their 10-year old’s birthday party to look like a celebrity wedding, even if it kills a sea otter or two.