During our recent blargument Marco wrote:

Facts say what the speaker wants them to (like statistics).

I responded:

This is an abuse of the word “fact” (and “statistic”). I know that your idea of what’s “fact” and mine do not necessarily like up exactly, but there’s no sense in trying to make “fact” mean “objective” and instead make it “subjective”.

We already have a word for that: “opinion”.

I might like to *say* that my opinions are facts, but that doesn’t make it any more true than if I say my car is a Ferrari. It may or may not be, but it would be silly to take my word for it without some sort of evidence (a peek in my garage, my vehicle registration, or perhaps a look at my bank account).

Persuasive arguments are not always false or misleading, but I am at a disadvantage if I take persuader’s word for it that his statements are true (ie: are facts). I need to take other information into account. Part of that may be experience (how accurate has he been in the past, is he drawing reasonable conclusions based on the evidence he’s presented), but outside evidence and/or well-reasoned counterarguments are even more reliable.

(I’ve added the emphasis in my reposting here.)

A week ago the U.S. Government Accountability Office published a study about corporations (both US-based and foreign-controlled) and the taxes they pay. It was factual, apparently objective, and probably accurate (I don’t know how well the GAO does their job, but for the purposes of this argument I’ll assume it’s correct). It specifically did not draw any conclusions from the facts that it presented.

The news media took the report and wrote hundreds of stories on it. Many (most?) of them had the theme “Corporations use tax loopholes to pay less than their ‘fair share’”., lead by the Associated Press who claimed that two-thirds paid no federal income taxes between 1998 and 2005. Even my favorite business news source, APM Marketplace, did a bit about big evil pampered corporations, leading off the story by saying that if real people were dodging their taxes on this scale, there would be public outrage.

The very first thing I thought of when I read the first of these GAO news stories was “were the corporations that aren’t paying taxes also not earning income?

In the U.S. (and in Canada, and probably most other developed nations), corporations pay “income” taxes on their profits, not their sales. This makes sense to most people when you explain it to them. “Sales” refers to the amount of money a business takes in. Subtract “costs” (what they pay out) from that, and the leftovers are what they keep: “profit”. Taxing based on sales (which would ignore costs and profitability) isn’t very effective, because it would hurt a an already struggling company with high sales and low or negative profitability (think GM) yet give a company with small sales and great profitability. There are such things as taxes on certain assets (which would effect business which own those assets, which may tend to be larger), but that’s not what the study was about.

Most people think of corporations as big entities with thousands of employees, woldwide reach, and millions (or billions) in sales — and thus want them to pay millions of dollars in taxes. The truth is that most corporations are small and local; many have only one employee. Many are short-lived too (many don’t survive beyond five years, although the actual numbers vary depending on the study). A lot of them don’t have profits in every year. The laws allow a business who has a loss in one year to apply it against their profits in another year for the purposes of taxes (allowing that business to “catch up” from a business slowdown). Some (similar to my own business, although I’m not incorporated) pay out all of their post-expense sales money to their employee(s) (who then pay personal income taxes on it), and thus show no profit and pay no corporate tax.

As it turns out, what I wrote above is probably a better explanation for the results than “corporate tax-dodging loopholes”. The GAO report itself wrote, in the very first paragraph of the summary:

Most large [foreign-controlled] and [US controlled corporations] that reported no tax liability in 2005 also reported that they had no current-year income. A smaller proportion of these corporations had losses from prior years and tax credits that eliminated any tax liability.

However, that’s not the story you got from most of the news articles.

A few sources did try to offer counterarguments to the popular story. Fark summed it up nicely:

Do corporations really pay no taxes? Or is it just a bunch of overhyped media BS on a slow news day? The real numbers indicate the latter

This is yet another example of why counterarguments are necessary in most (if not all) discussions. Facts don’t speak for themselves (in fact, they don’t speak at all; they don’t have mouths), but everyone with an opinion or an agenda will be quick to offer theirs as the “correct interpretation” of the facts.

It’s too much to ask for an unbiased interpretation of the facts from any one source (as evidenced by the countless examples of biased interpretations) so your best bet is to get multiple interpretations, analyze the reasoning behind their conclusions, and determine the best conclusion based on the strength of the arguments.

Note that this doesn’t necessarily mean picking the best argument out of the group of all arguments. Each argument should have some aspect of the truth in it (if it’s completely faulty then you can discard it). Conclusions will usually only be true if their assumptions are correct, and often decision making comes down to picking from the most probable (but not necessarily correct) assumptions. If it comes down to a choice between one good argument with bad assumptions and one bad argument with good assumptions, you might get the best results by combining the two.

We in North America love to say that money can’t buy happiness. Justin Wolfers has writen a six-part blog post describing how that is not necessarily true — in fact, money and happiness are in fact strongly correlated.

The facts about income and happiness turn out to be much simpler than first realized:

1. Rich people are happier than poor people.
2. Richer countries are happier than poorer countries.
3. As countries get richer, they tend to get happier.

Moreover, each of these facts seems to suggest a roughly similar relationship between income and happiness.

There’s a lot of great facts, data, and analysis in his series — far to much to explain here. Instead, I’ll simply link to the articles and recommend that you read them if you’re interested. They’re quite an easy read and have some great graphs.

1. Reassessing the Easterlin Paradox
2. Are Rich Countries Happier than Poor Countries?
3. Historical Evidence
4. Are Rich People Happier than Poor People?
5. Will Raising the Incomes of All Raise the Happiness of All?
6. Delving Into Subjective Well-Being

Also, here’s the original research paper. (Note: PDF)

I would like to post two significant quotes though. Firstly:

When we plot average happiness versus income for clusters of people in a given country at a given time, we see that rich people are in fact much happier than poor people.

It’s actually an astonishingly large difference. There’s no one single change you can imagine that would make your life improve on the happiness scale as much as to move from the bottom 5 percent on the income scale to the top 5 percent.

Also:

There’s another striking finding in this graph: the relationship between happiness and log income appears nearly linear.

Thus, a 10 percent rise in income in the United States appears to increase happiness by about as much as a 10 perecent rise in income in Burundi.

Even so, it is worth noting that a 10 percent rise in income in Burundi requires one-sixtieth as much income as a 10 percent rise in income in the U.S. Thus, even if the slope is three times as steep for rich countries as poor countries (as we estimate), this still means than an extra $100 has about a twenty-times-greater effect on happiness in Burundi than it would in the United States.

I think that this last one plays a significant role when discussing fighting terrorism (and foreign policy in general). If terrorism does have its roots in unhappiness (which is not proven but quite likely true) then the most effective means of combating it may be to take the money spent on rich-nation soldiers and arms producers and sink it directly into improving the lives of poor-nation civilians. That may have a better bang-for-your-buck ratio than trying to attack terrorists directly.

Lastly: these data show correlations, and correlations are not causations. It is not possible (yet) to say that money does cause happiness. It may very well be the opposite effect: happiness causes productivity and thus higher GDP. However, there is some evidence that it really is the former situation (see the articles for full details), and I think that we’ll see a stronger causal link in the future as more research is done.

There’s a fair amount of evidence and for the Efficient Market Hypothesis, which states that it’s impossible to achieve better-than-market returns (when adjusted for risk) on a regular, repeatable basis.

However, if there’s one person who can disprove the EMH, Warren Buffett is that person. Not only has he very consistently done better than the market for decades. Not only does his existence create some evidence against the EMH, but he can cite other real-world examples too:

We bid on this particular issue - this happens to be Citizens Insurance, which is a creature of the state of Florida. It was set up to take care of hurricane insurance, and it’s backed by premium taxes, and if they have a big hurricane and the fund becomes inadequate, they raise the premium taxes. There’s nothing wrong with the credit. So we bid on three different Citizens securities that day. We got one bid at an 11.33% interest rate. One that we didn’t buy went for 9.87%, and one went for 6.0%. It’s the same bond, the same time, the same dealer. And a big issue. This is not some little anomaly, as they like to say in academic circles every time they find something that disagrees with their theory.

Buffet has also said:

Observing correctly that the market was frequently efficient, they went on to conclude incorrectly that it was always efficient. The difference between these propositions is night and day.

Unfortunately, frequently efficient is enough to force most of us to give up on dreams of making it big in the stock market. It’s been shown time and time again that most investors cannot beat the market (after adjusting for risk) on a regular basis. (Keep in mind that this includes most active mutual fund managers too).

Buffett knows this, and gives some advice for us unwashed masses:

Well, if they’re not going to be an active investor - and very few should try to do that - then they should just stay with index funds. Any low-cost index fund. And they should buy it over time. They’re not going to be able to pick the right price and the right time. What they want to do is avoid the wrong price and wrong stock. You just make sure you own a piece of American business, and you don’t buy all at one time.

He also said:

…for most people, the bulk of their income is going to come from earning power in their chosen profession. Therefore, from the standpoint of building wealth, free time is better spent sharpening one’s professional skills rather than studying investing.

Personally, I’ve seen a lot of people at a lot of different jobs spend their time chit-chatting about stocks and investing rather than working or finding ways to enhance the business they’re already in. And consider this: how many people do you know that have made the bulk of their fortunes investing their own money in companies that they didn’t also have a hand in managing? Keep in mind that most professional financial investors make their money from commissions, not investments, and most capitalists, entrepreneurs, and executives make their money from growing their own companies. There’s only a handful of Buffetts that make it big in stocks.

(Inspired by this Lifehacker post.)

My old college buddy asks:

When you are trying out a new development tool, what do you look for to help you learn how to effectively use the tool? Is it help files, tutorials, white papers, samples, case studies, etc? Or do you learn best by participating in classes or through mentoring? Perhaps you only try to learn tools that are easily assimilated, and if so, what makes one tool easier to learn than another?

There’s a saying in the field of User Interface Design (computer and otherwise) that goes “there should only ever be one button: one that does exactly what the user wants.” Of course, this is hyperbole, but it does illustrate the theme of UI design: make the tool as easy to use / simple / natural as possible. A more usable product is the one that the user needs the least amount of thought to use and the least amount of initial training.

Accomplishing this is incredibly difficult, which is part of the reason why most user interfaces are absolutely horrible (the other is that most engineers don’t study usability, especially usability for mass audiences). Fortunately, this is getting better: Apple has made UI a sellable feature, and User Interface Design is now a bona fide field of research that gets attention from the builders (if you’re interested, you can start with Neilsen, Norman, and Tog, the current gurus of usability.

Now, to answer Graham’s question:

what do you look for to help you learn how to effectively use the tool?

Here’s my order of preference:

1. The tool should follow some natural metaphor, if possible. Ideally, the tool should behave as if it is an extension of my body / mind. This way, there’s no learning curve; you already know how to use it. Unfortunately natural metaphors are hard to come by in the decidedly un-natural world of technology, so most of the time this isn’t available. Still, I think it should be said.
2. If tool can’t follow a natural metaphor, then it should follow a familiar one. That is, it should try to duplicate one that already exists. This way there’s zero learning curve for users who already know the preexisting metaphor. There’s two big catches to this approach though:
   1. The old metaphor may not be terribly good to start with. Garbage in usually means garbage out.
   2. The old metaphor may not translate well to the new medium. QuickTime 4.0 is the poster child for this problem.
3. If the tool can’t be familiar then it should be self-describing. The means of accessing the features should be apparent (in fact, blatant). Available features should be displayed (rather than hidden) at the ready. This makes the learning time efficient: you are able to learn while you actually use the tool. A good illustration of this principle is the use of text rather than graphical icons to represent features: text describes the feature far more explicitly and accurately than a (tiny) picture.
4. If the tool can’t be (effectively) self-describing, then it should have description waiting in the wings for the initial learning period. Think of a tutorial, but one that teaches as the user uses the tool. Some modern games are great examples: every time that you encounter a new tool, feature, or technique they give you a brief explanation of how to use it, followed by some time to put it into practice. Play Half-Life or Portal with the commentary on to see the thought process behind this technique.
5. If you can’t do an effective tutorial mode, the next best thing is to have built-in (local) context-sensitive help ready at the touch of a button. There are three important factors to application help: relevance, speed, and connection to other topics (ie: lots of hyperlinks). This will help a user get out of a jam, but it may not do much to get them started in the first place.
6. If local help isn’t available, putting your help on the Internet (say, in the form of a FAQ) is almost as good as local help, although it’s not available if you’re disconnected (ie: on a plane). Internet help also lets you enhance help post-launch and get feedback/usage stats. If you get a good community behind the tool, they can potentially help with the help (with wikis & blog posts).
7. Examples can be useful; lots of people learn better from example than they do from a spec. The major problem with examples though is that they are necessarily of narrow focused and contrived. They may not be answering the questions that are being asked, and they certainly won’t be able to answer every question.
8. White papers and other wordy documentation are not nearly as useful as other forms of instruction; it’s harder to find the solution to a particular problem when it’s floating in a sea of flat text. Always remember that, as a rule, people don’t read.
9. Screencasts are appropriate for dynamic situations, where capturing the actual motion is important. Otherwise, video just becomes a very hard-to-use interface to the information being communicated; think of a book where the pages are turned at a fixed rate. Static text and pictures are better for most applications.

I’ll leave mentoring off my list entirely. I’ve never been a fan of (nor had much experience with) mentoring, because:

• I’ve always had a do-it-myself (and discover-it-myself) attitude.
• I’m often learning at the (b)leading edge of things; mentors with prior experience aren’t always easy to find.
• Likewise, people with more experience are often too busy to spend a lot of time mentoring. They’re adding more value by operating, especially if I’m able to learn effectively without their help (which, in turn, makes me more valuable too).
• I’m more anti-social than most. For work purposes at least, personal interaction is a means to an end, not an end in itself.

These don’t apply to many (most?) other people though, so they’re not a criticism of mentoring itself. Many people appreciate mentoring and find it valuable.

Lastly:

Perhaps you only try to learn tools that are easily assimilated

I certainly prefer easily-assimilated tools. A small learning curve makes the tool more efficient, which is half of the value equation. The other half is effectiveness, and that’s where poor tools can find their niche. If there’s no other tool that can do the work of one with a crappy interface / steep learning curve, then there’s not much choice in the matter; I’ll have to bite the bullet and learn / use it. But I’ll always be looking for a way out.

I’ve just discovered that the guys behind Freakonomics have a blog on the New York Times Website. And the peasants rejoiced.

I liked this post in particular: Freakonomics v. Lolita: Can You Tell the Difference?

Fark says it best: “What happens when you give an old crazy man with no understanding of economics the reigns to a wealthy country?”

The answer is obvious: rampant shortages, the collapse of the business environment, black marketeering, and riots. Poverty and starvation are right around the corner.

Zimbabweans are shopping like there’s no tomorrow. With police patrolling the aisles of Harare’s electrical shops to enforce massive government-ordered price cuts, the widescreen TVs were the first things to go, for as little as £20. Across the country, shoes, clothes, toiletries and different kinds of food were all swept from the shelves as a nation with the world’s fastest shrinking economy gorged itself on one last spending spree.

This sort of market-blindness isn’t just in Zimbabwe of course; Chavez has been putting in price caps in Venezuela too. The difference there is that Chavez can buy out his mistakes with a steady income of Venezuelan oil money. It’s not just an “over there” issue either; hurricanes such as Wilma and Katrina bring up talks of anti-price-”gouging” laws.

What most people (including national leaders apparently) don’t understand is that the number involved in a price (including the price of labour: wages) is pretty much arbitrary: it’s just a placeholder for actual value/wealth. Changing prices across the board doesn’t make things more or less valuable or available; all it does is change the value of the cash itself, both in hand and in bank accounts. Force people to sell at below the market price and you’re not making goods more accessible: you’re simply transferring value from the business to the consumer in a one-time shot. You can’t afford to do that forever (or even more than once); there’s no incentive to create more wealth if you’re going to have it taken from you.

The same goes for minimum-wage increases by and large: by dictating that business pay employees more, you’re not creating more wealth to better the lives of those employees, you’re just moving the goal posts. A employee who earns the minimum wage is also earning minimum value, and that doesn’t change when you increase the number attached to the law. What does happen is that you evaporate the value of anything that’s tied to a particular amount: things like savings accounts and old-age pensions which aren’t indexed to inflation.

Mugabe doesn’t realize (or intentionally ignores) the relationship between money and value — and so he’s going to get hit in the head with the reality of “bookish economics” in short order. Let’s hope everyone else learns the lesson.

Scott Adams does it again. This time he’s prosing (with tongue in cheek) that, in exchange for higher taxes, the super-rich get extra privileges that don’t really have a significant impact on the rest of us.

For example, let’s say the super rich are granted the right to use the carpool lane even if no one else is in the car. They’d need special stickers on their cars so they didn’t get pulled over. It wouldn’t clog the car pool lane because there are so few super rich people, and half of them have chauffeurs, so they use the carpool lane already. Society wouldn’t notice the difference.

While I’m not expecting any of this to actually happen, it did make me think. Consider that:

1. The super-rich already get special privileges. They’re just not official ones.
2. They’re paying for them with money that they’d otherwise keep.

The idea of special rules for special people is an obvious affront to egalitarianism. However, that same egalitarianism should, in theory, be affronted by the difference in wealth. Adams’ idea is about trading one inequality for another; they should really balance each other out.

So why does the special rules suggestion offend me (and I suspect everyone else as well) so much? That is what makes me wonder.

This is perfect material for a third Freakonomics book: Using promiscuity to slow the spread of AIDS.

The premise is this:

1. Person A and Person B, under normal circumstances, would decide to hook up. Both are infection-free.
2. Person A decides against having sex due to STD concerns.
3. Person B still wants to find a partner.
4. Person C is not dissuaded by STD concerns, and is both available and infected.
5. Since Person A is out of the partner market, Person B sleeps with Person C instead, and becomes infected.

Had Person A decided instead to sleep with Person B, Person C would not have had a chance to infect B, and so the disease slows in its progress.

The author then goes on to discuss individual vs. group benefits, how the interest of the former can directly conflict with that of the latter… and how to work around that so that both can benefit. Great stuff.

It figures: now that I’m living in Canada and earning US dollars, the exchange rate between the two hits its worst level in my lifetime.

Still, I’m not complaining too loudly: I did pay off my student loans while the exchange rate was near the historically best levels (circa 1999). Complaining that the exchange rate is poor is like complaining about the weather: you can’t do much about it, unless you’re willing to move… and it’ll probably change by the end of the week anyway.

Microsoft is going to set up shop in Vancouver. One of the reasons for doing so is the more favorable immigration policy in Canada:

The Vancouver area is a global gateway with a diverse population, is close to Microsoft�s corporate offices in Redmond and allows the company to recruit and retain highly skilled people affected by immigration issues in the U.S.

This is a good thing for Vancouver and Canada, a big win for those who favor relaxed immigration policies (such as myself), and a big slap in the face for those in favor of tighter immigration controls — both for economic and homeland-security reasons.

There are smart & talented people all over the world. Those people may not be able to do the work they want to do in their home countries for a variety of economic and political reasons. Many of those people aren’t allowed to work in the U.S. due to the American love-hate relationship with immigration; this practice will allow them to work in a similar (better?) environment. While they do that, they’ll draw a salary (which is largely made up of U.S. money) and spend most of that within Canada (on taxes and domestic purchases).

Microsoft is showing that it’s not just trying to lobby for an H1B cap increase (as many have claimed): they’re serious enough about a real problem to take some actions outside the realm of the U.S. Government. The message to the American closed-border crowd is very clear: current policy is detrimental to business, and if it’s not corrected the U.S.A. will be loose out in the long run.