The D-Squared Digest One Minute MBA – Avoiding Projects Pursued By Morons 101

Good ideas do not need lots of lies told about them in order to gain public acceptance. I was first made aware of this during an accounting class. We were discussing the subject of accounting for stock options at technology companies. There was a live debate on this subject at the time. One side (mainly technology companies and their lobbyists) held that stock option grants should not be treated as an expense on public policy grounds; treating them as an expense would discourage companies from granting them, and stock options were a vital compensation tool that incentivised performance, rewarded dynamism and innovation and created vast amounts of value for America and the world. The other side (mainly people like Warren Buffet) held that stock options looked awfully like a massive blag carried out my management at the expense of shareholders, and that the proper place to record such blags was the P&L account.

Our lecturer, in summing up the debate, made the not unreasonable point that if stock options really were a fantastic tool which unleashed the creative power in every employee, everyone would want to expense as many of them as possible, the better to boast about how innovative, empowered and fantastic they were. Since the tech companies’ point of view appeared to be that if they were ever forced to account honestly for their option grants, they would quickly stop making them, this offered decent prima facie evidence that they weren’t, really, all that fantastic. [...]

Fibbers’ forecasts are worthless. Case after miserable case after bloody case we went through, I tell you, all of which had this moral. Not only that people who want a project will tend to make innacurate projections about the possible outcomes of that project, but about the futility of attempts to “shade” downward a fundamentally dishonest set of predictions. If you have doubts about the integrity of a forecaster, you can’t use their forecasts at all. Not even as a “starting point”. By the way, I would just love to get hold of a few of the quantitative numbers from documents prepared to support the war and give them a quick run through Benford’s Law.

Application to Iraq This was how I decided that it was worth staking a bit of credibility on the strong claim that absolutely no material WMD capacity would be found, rather than “some” or “some but not enough to justify a war” or even “some derisory but not immaterial capacity, like a few mobile biological weapons labs”. My reasoning was that Powell, Bush, Straw, etc, were clearly making false claims and therefore ought to be discounted completely, and that there were actually very few people who knew a bit about Iraq but were not fatally compromised in this manner who were making the WMD claim. [...]

The Vital Importance of Audit. Emphasised over and over again. Brealey and Myers has a section on this, in which they remind callow students that like backing-up one’s computer files, this is a lesson that everyone seems to have to learn the hard way. Basically, it’s been shown time and again and again; companies which do not audit completed projects in order to see how accurate the original projections were, tend to get exactly the forecasts and projects that they deserve. Companies which have a culture where there are no consequences for making dishonest forecasts, get the projects they deserve. Companies which allocate blank cheques to management teams with a proven record of failure and mendacity, get what they deserve.

[...] The raspberry road that led to Abu Ghraib was paved with bland assumptions that people who had repeatedly proved their untrustworthiness, could be trusted. There is much made by people who long for the days of their fourth form debating society about the fallacy of “argumentum ad hominem”. There is, as I have mentioned in the past, no fancy Latin term for the fallacy of “giving known liars the benefit of the doubt”, but it is in my view a much greater source of avoidable error in the world. Audit is meant to protect us from this, which is why audit is so important.

The second and third point as Bayesian slogans:

2 - motivated prediction is not evidence!

3 - measure calibration!

I'm still searching a good slogan for the first.

downvoting still disabled, but I didn't find this link worth following.

Weird defensive tone. Political references to things I don't follow closely (and that are actively mind-killing). Generalizations that are simply wrong.

What interesting ideas do you find here? This looks like a ranty of-course-it's-clear-in-the-rearview-mirror "wisdom" to me.

Good ideas do not need lots of lies told about them in order to gain public acceptance.

There's one construction of this which is obviously false - lies being told in support of X doesn't inherently discredit X, because often there are also lies being told supporting not-X, and they can't both be false. But in the stock options example, Davies is pointing to something more specific: a principled argument for lies, on the grounds that they are necessary to support the desirable policy. His application of this to the Iraq war generalizes this somewhat: when you find people explaining away the misleading statements of the principal advocates for an action or proposition, as just part of a sales pitch, you should suspect that the lies are in fact central to the case, and not just accidental.

Fibbers’ forecasts are worthless.

This is a pretty radical claim. It makes the most sense in conjunction with the last point, about audits. In the absence of any force holding people to account, once they've shown themselves willing to mislead at all, we should expect people to lie quite a lot. But, in practice there are varying levels of audit and I'm not sure what cognitive simplifications to use.