While talking about the growth of VLTs, Nelson says the following:

I’m always fascinated when people get addicted to virtual things, which often times seem to boil down to a game that involves risk and intermittent reward — where does this tendency come from?

There is a large class of human behaviours which fall under this structure. Consider an action like checking e-mail throughout the day. There is a risk that your checking of e-mail will return nothing (except your disrupted focus), while there is an intermittent reward of getting an interesting or exciting e-mail. Finding food for many animals might be a similar sort of situation. I would guess that the tendency is probably rooted deeply in human (and other animals’) psychology, and serves very useful functions as well as not-so-useful ones.

(Also see this post.)

What is risk? In investment, the term is often used. “What is your risk tolerance?” is an example.

In reality, the chance of something occurring (as in a deterministic universe) might be 0 or 1. Typically, when people are talking about risk, they are talking about an estimation of the chance of something occurring. An estimate is a subjective evaluation - that is, it is based on the information the agent has about a system. Therefore, for practical purposes there is no ‘risk’ inherent in any investment strategy, only different risk evaluations based on subjective types or amounts of information different investment agents have.

Also, for different individuals, the objective riskiness of a given situation varies. For example, if you have never ridden a bicycle, the risk of hopping on one is fairly great. If you have learned how to ride a bicycle, the risk is fairly small. This is why extreme sports aren’t typically as risky as they seem. Similarly, in business, an entrepreneur may have systematically minimized the risks in various components of the enterprise, therefore making it much less risky than it may seem (or not, of course).

So, different individuals’ evaluations of risk (given a constant system) can differ (due to differences in information, simply put - obviously, it’s more than just ‘information’ but rather a relevantly adequate understanding of that system and its possible outcomes), and risk is relative to the individual interacting with the system in many cases.

Typical analyses of ‘risk’ in various investments involve some assumptions about the information levels available pertaining to possible outcomes. The idea that diversity of investment types reduces risk, for example, often relies upon the premise that information about possible outcomes in specific areas is of a low quality. If, on the other hand, you have relevantly important information about a specific type of investment, the risk of investing in just that type might be very low relative to the risk of diversifying your investments to areas where you have less relevant understanding of possible outcomes.

Most investors have very little information about a given investment system and the possible outcomes. They hire someone, who presumably has a better understanding of the various possible outcomes, and in some cases has a better ability at interacting with the investment system (as in buying and selling at key points), and can therefore minimize risks for them and increase their return. The question for most investors, then, is what sort of investment of their own time would be required to significantly increase their understanding of some possible investment system, such as to decrease the risk involved for them in investing in it?

My guess is that it would not be that hard to get to the point where you can have less investment risk by doing this than what you would have by using the experts who are offering their investment services, typically. Maybe a few months of dedicated study? Financial investment in many cases is basically recognizing potential growth and value in a company. Similarly, the value in trying to understand broad, abstract financial systems may be overrated.

In short, risk tolerance is usually posed against a backdrop of a notion of objective risk. In reality, subjective appraisals of risk (”subjective risk”) in these products can shift sharply, as a given agent’s understanding of the financial systems involved becomes better (or worse). Understanding of the risks involved in a diversified investment portfolio means multiplying the investment areas to understand (or having to understand ‘higher-level’ financial systems, which might be more difficult to understand than more contained financial systems), which can result in increasing the subjective risk. In other words, beware of financial maxims that involve very complex systems.

[Optimism] inhibits lucid thought, it shuts down core reasoning centers and seems to inflict terrible damage on memory. It is optimism that continually causes us to lose our respect for limits and to have unrealistic expectations of what we can achieve, which leads us to set ourselves up for failure and disaster by encouraging us to overreach and believe that we can find a solution to every problem.

Larison above is talking about optimism with respect to foreign policy, but I think much of the critique can be extended to optimism in general. On a personal level, I suggest that the appropriate response is to replace unqualified optimism with optimistic skepticism.

While optimism thinks that the best will happen, optimistic skepticism thinks the best probably won’t happen, and that therefore one can prepare for the various non-optimal scenarios that most likely will result. That is, because one is appropriately skeptical, one can create plans that will actually work.

With governmental policy, the optimist will think that this governmental program will work (even though most or all of the ones in the past aimed at fixing this problem have not or have made the problem worse). The optimistic skeptic will think that this governmental program will probably not work, and therefore one can plan and calculate based on that premise - which in itself can be quite useful.

On a personal level, it’s similar. This plan (for example, an exercise plan) probably will not work - unless there is an extreme level of effort, skill, time, external pressure, and so on, brought to it - much like project plans in business where you double (or triple or quadruple) the time to completion and half the features. At that point, your chances of having a realistic plan increase significantly, and therefore any plans you have that depend on this plan have a greater likelihood of also going to completion.

Here is a practical example. Tomorrow, the optimist in me thinks, I will get up at 6am, go to the gym, and then get in 4 hours of high-productivity work. “Right,” thinks the skeptic. The optimistic skeptic’s role is then to figure out a plan that will actually make that happen. “I will pay my neighbour $5 every day for a week to bang on my door at 6am until I answer it. I will then arrange to meet someone at 6:30am at the gym (with some sort of social cost if I don’t show up on time). Finally, I will meet a friend at Starbuck’s at 8 for a quick chat, and then work there until 12:30pm.” Now the chances of the plan completing are starting to go up. Repeat until you think you have just a silly amount of effort being brought to bear.

Now you probably have a plan that will work.

It seems that a lot of time and effort has been put into designing better jet engines for airplanes, for example, but relatively little has been put into designing better customer spaces within those airplanes. Perhaps some of this is itself by design (that is, airplane companies want to differentiate economy class from first class, and so intentionally make the economy class uncomfortable, barren, and so on).

Better jet engines can make a flight take less time (among other things), but better customer spaces can make a flight seem like it takes less time (because it is more comfortable, or there are things you can more easily do that will make time seem to pass more quickly), and from a customer’s perspective, the latter can be more important.

I was on an airplane recently that had a relatively simple design innovation - cup holders that folded out of the top of the seat-back in front of you. This was great, because it meant you could have a drink while not having the tray folded down and so interfering with the little space you have in front of you. This is a relatively trivial design modification that has made the “user-interface” of airplanes significantly better. (Often with user-interfaces, the best innovations are the simple ones.)

(Another obvious example of something that isn’t exactly a technology is customer service while on an airplane. I have started to disregard the cheapest air fares, and instead look to travel with companies that provide excellent customer service, because this can often add a large amount of value to a flight (if only in the conviviality of the other customers).)

Consider: if you’re paying $400 for a flight, and the flight takes 4 hours, that’s effectively $100 per hour. However, you now have 4 hours of potential value creation while on the flight. If you’re in an environment that is comfortable and so on (i.e., is conducive to you creating value), you might actually create more value than the cost of the flight. For example, if you’re able to engage in high-productivity work that will generate $400 for you, the flight becomes free. (I think this line of thought is how some people justify first-class airfares. On long flights, for example, what is a good sleep worth to you? Well, if you don’t get a good sleep how will that impact your next day? What is the potential value you could create the next day? And so on.)

Here are some simple questions that I’m sure have better answers than are currently embodied in plane design:

How do you make seats more comfortable without expanding their size (for example, changing the cushioning, changing the armrest materials, and so on)?

How do you make seats more comfortable for sleeping, or alternately can you provide things that help expedite sleep (a few examples of this are sleep guided meditation channels combined with earphones that better block the background sound of being on an airplane, and advances in head supports or head rests)?

How do you better utilize the back surface area of chairs for customer usage?

How do you increase the space available for customers (for example, can you make seats more thin by changing construction materials)?

My suspicion is that there is something irrational afoot in how airplanes are typically made vis a vis the R&D put into enhancing customer experience.

Why do people tip? I’ll restrict this to tipping related to eating.

Custom. It is difficult (i.e. impractical) to question many or most things about how things are done, so people just do what the custom is and don’t question whether it is beneficial to themselves or not.

Status. They believe tipping increases one’s status amongst people with whom they are eating (or perhaps even the servers or kitchen staff), and a sense of status is a basic human need.

Generosity. People like to give because it makes themselves feel better (a warm feeling of having done something good for someone else).

Fear. You might be afraid of angering the person who by custom would get a tip, and therefore receiving some sort of emotional cost on yourself by not tipping - so you tip.

Better service. By tipping, the customer believes the service staff will provide better service.

This last one deserves extra comment, because it is widely misconceived. If you are in a one-time situation (traveling for example), and you tip the server, you will not increase the quality of the service if you tip at the end of the meal. This only works if you are in a repeated situation and if the server will remember your previous tip and give higher quality service than otherwise the next time.

It is true that as a society the expectation that one will be tipped by a customer might cause better service on average. This societal cause and effect happens regardless of whether you tip, however, so isn’t a good reason for you to tip in a specific one-time situation.

One problem with many “conservative” critiques of media messages is that they grapple too much with the content of what is being sent. It is clear that most media messages utilizing sexual imagery, for example, exist simply to sell products, and once understood in this light the idea of trying to figure out whether this or that message is true or good for you becomes an exercise in silliness. It becomes clear that it is a waste of time to be receiving those messages in the first place. That is, it is typically much more useful to interpret a message in a “class ontogenic” sense - that is, to understand how it came about or why it is in your space in terms of its membership in a broader group of messages, and as a policy measure what simple action(s) to take to prevent or replace them in the future if an analysis of their origination makes it clear that they probably are not going to add to your long-term well-being.

In a commercial sense, most people have little of true value to offer.

I’m now starting a 21 Day No-Complaint Experiment (go 21 days without complaining, start back at 0 if you notice you complain). In discussing his own 21 day experiment, Tim Ferriss offers the following definition:

I defined “complaining” for myself as follows: describing an event or person negatively without indicating next steps to fix the problem. I later added the usual 4-letter words and other common profanity as complaint qualifiers, which forced me to reword, thus forcing awareness and more precise thinking.

Taking something like a negative description and adding the “next steps to fix the problem” is a sort of process that can be generalized to any time you feel fear, frustration, or negative emotions. Negative emotions are (can be) useful, because they can tell you about important information in your environment. The key often is to turn them into a “How to …?” sort of question (next steps to fix the problem). For example, if you start feeling frustration at not accomplishing a task, if you immediately take that as a cue to ask “How could I do this more quickly and easily? What assumption am I making here that might not be true?” and so on, the frustration becomes useful instead of just “negative”.

(I find I have some resistance to “How to …” questions, because if I’m used to getting a certain result (usually maintained with a no-action question like “Why do I always get this result?!”) and then I move to a “How to …” question (like “How do I get a different result in this situation? What exactly could I do differently to get a different result?”), the possibility of getting a good answer stands as a certain kind of threat to things that have been less than optimal but in a way comfortable.)

After doing this for 4 months, Ferriss noted that his “lazier thinking evolved from counterproductive commiserating to reflexive systems thinking. Each description of a problem forced me to ask and answer: What policy can I create to avoid this in the future?”

Here we go … Day 0.

Theoretical change is often achieved through the reinterpretation of ambiguous data that people often didn’t realize was ambiguous.

Can someone name 5 prominent female directors?

Can someone name 5 “good” movies made by female directors?

Eagle Eye, a political thriller that features elements of 2001: A Space Odyssey and Terminator, is a thought provoking film about surveillance and inter-connectivity. However, it’s also a little silly. The reason is that “Artificial Intelligence” - i.e., getting computers to behave like adult human organisms - doesn’t really work, yet. Much of what seems like “intelligent” behaviour from computers is actually “kludges”, neat programming tricks, and so on - probably nothing like how humans actually do it.

The consensus emerging from computational intelligence studies in the last few years is that either a) the brain is much more computationally powerful than previously thought (in particular, that neurons don’t compute just by their connections to each other - inter-neural - but also that within each neuron there is a significant amount of computation - intra-neural), or b) the process by which humans and other organisms develop “intelligent” behavioural capacities is very different from how scientists are currently trying to get computers to develop these sorts of capacities. My guess is that it’s a mix of both. Brains contain a lot more sophisticated of causal processes than previously thought ( a) ) and the way to get the sort of “intelligent” behaviour typical of human organisms requires different ways of setting up those causal processes than we have currently been doing ( b) ).

The short of this is that behaviour such as Eagle Eye’s computer is nowhere to be seen in current computers. People who don’t know how computer programs work often don’t have a sense of the range of possibilities, and so science fiction writers such as Eagle Eye’s can make up stories about things happening that are absurd. This is similar to myths where fantastic things happen to the characters - if you don’t understand the limits of “magic” then saying that a woman turns into a tree or what have you doesn’t seem absurd, but once you start to develop a detailed logic of how things in this area work (biology, morphogenetics, and so on), you can start to discount these stories. This is the basic trajectory science has charted over the past several hundred years, overturning beliefs people had that nowadays seem far too credulous, but at the time didn’t seem so because they didn’t have a developed logic or model of how the world works in that area which would exclude that sort of phenomena.

Post-script: The term “computation” is also a little silly. The human brain is a complex causal process, and “computers” are also complex causal processes. There is nothing magic about computation, except that it is used to describe what “computers” typically do. When it comes to computers emulating what humans do, the programmers are trying to set up a set of causal processes in the computer that are similar to the causal processes in a human brain. In this sort of case, “computers” are just open-ended platforms for setting up relatively intricate causal processes, interfaced with typically by some “language”.