Assumptions are dangerous

I assume you will love this post so much that I will swim in gold. Thus, I will buy a boat.

Intentional vs. unintentional assumptions

Assumptions are necessary. You can’t live without them because you got no perfect information about the world. There is always some factor which is undiscovered or some uncertainty. Nothing special. You already knew this.

Yet there are basically two types of assumptions. The first one, is the good one, the one you make explicitly. For example, if someone asks you how many barbers are in your state. You start by making explicit assumptions like “I go about once a month to a barber, therefore ….”. These types of assumptions could also be called hypotheses. You can formulate testable statements. In the barber example, you may assume because you go once a month so does everybody on average. The hypothesis is then “Everybody goes once a month to a barber on average”. This is testable and you can reject it. You can take a survey or look up statistics or just sit in front of barbers all day counting the people.

The bad kinds are the unintentional assumptions. These can be abstractions you hold in your unconscious mind. For example, stuff you experienced in your childhood or just made up. Or they can be prejudices. For example, you assume that your fellow students in college won’t like you because your current classmates don’t like you. This can be dangerous. In every part of your life you can face these assumptions. They become especially dangerous if you don’t adjust them or don’t even think about them. This is a big part of cognitive psychology. You have to make your assumptions concrete to correct them.

Assumptions which aren’t necessary

Some assumptions are made although they aren’t necessary. Most often they come from fear. “I will be seem as dumb if I ask this” – that’s also an assumption. These can rank from not asking to repeat something if you didn’t understand it to life threatening events. If a doctor assumes that you don’t have allergies and injects drugs which are you allergic to, you have a good chance to die. I would call these kinds of assumptions: “Just ask”. It’s such a great and easy way to deal with these types of assumptions. They are everywhere. The girl who would reject you. Just ask. The company doesn’t need me. Just ask. My wife hates me for golfing. Just ask. It’s so easy to destroy these assumptions. Which is the first one you destroyed?

Assumptions can ruin everything

I talked a bit about this in the previous paragraphs. They can ruin everything. One of the most important steps is that you become aware of your assumptions. Then you can start thinking rational about them and reject them if they are wrong or adjust them. If you imagine how much better your life would be if you would ask and adjust your assumptions instead of hiding behind them. You may live with the love of your life, have your dream job and have the greatest friends possible. Not very likely I admit. Still, you can improve your (mental) life a lot if you start to ask instead of just assuming.

Assumptions and self-fulfilling prophecies

This step follows nicely. You assumptions are your core believes about something. People also have the tendency to have a conformation bias, i.e. they put more weight on things that strengthen their existing believes. If you assume that your neighbor’s child must be “bad” (whatever that means) because your neighbor is an asshole, you will start to see more bad than good behaviors of him. Continually, your assumptions will be stronger and your prophecy will fulfill yourself in your perception. If you are somebody who has a lot of power over somebody else (parents, teachers, bosses, etc.) your assumptions will influence your behavior which will then in turn influence the behavior of your protegĂ©. There were multiple studies where teachers were given wrong information about the ability of their students. After some time, the students developed towards this wrong information. The assumptions teachers made became self-fulfilling prophecies.

Search Engine Design meets Economics

Also a 2-year-old post for a search engine which is build on an other foundation. Nice idea.

Google is working on penalizing over-optimized pages and still it probably won’t affect the results for long which isn’t too surprising. If there’s a method to exploit certain circumstances people will probably do it.

The goal here is to let the users themselves inform the search engine as to what content is good — hence the plus-ones, social search and all of that stuff. But all of this is still indirect evidence. Unless you could plug a computer inside the head of a person and watch their every thought, the only real data you have for input is server logs, click-throughs, and all kinds of other things that computers do, not people.

I just don’t see this being solved any time soon. But I do see it getting so complex and unwieldy that it continues to frustrate searchers and content producers alike. —DanielBMarkham

In economics there’s this ultra interesting thing called a market mechanism. Basically is a system that leads to some (desired) results. Could we apply the logic of building economical mechanisms, with the help of mechanism design, to build a search engine which is self-regulating?

What the fuck are you talking about?

Let’s make it super easy. You have an apple and what to sell it at the highest price (this is your desired outcome). How should you do sell your apple? Making a fix price and waiting for a buyer? Do a second price auction? Create an algorithm for pricing your apple?

Let’s see how these scenarios play out.

Fix price

You set the price for your apple to $5. There are three cases. The maximal value in your market is either less than $5, i.e. nobody buys your apple and it will rot. It is exactly $5, i.e. you will get your $5. Or it is higher than $5, i.e. you still only get your $5.

Algorithm

You look at past prices of apples. You try to find factors which influence the price: season, size, color, freshness. You build your model and price your apple adequately. The problem is that your apple may be an outlier, e.g. really big or has a new color. On average, you get what you can expect on average. This model is a bit better than the first one because you will sell your apple with a higher probability. Still you can underestimate the market value of your apple.

Auction

You take your apple to an action and let people bid secretly. After everyone submitted their bid the highest bidder will pay the second highest price. In this case, you can detect the highest market value (which is interesting for the future). Furthermore, you will receive, if there are enough bidders, the highest price for your apple.

There’s tons of literature on this topic. Go read Experimental Auctions if you are interested. You can understand it even if you didn’t know much about micro economics / game theory.

How can we take this idea in the realm of search engines?

This was my initial question. We can design market mechanisms that work quite well to reach a desired price. The interesting thing about market mechanisms is that they work well even if they are gamed (to a certain degree). My idea than was. What if we build a system where we expect people to game it instead of hoping that the users will play by the rules?

Analogy

In the moment, it looks like Google is using some kind of the algorithm approach. They say that they don’t interfere directly from data but look for factors. One example is the amount of links (super simplified). This was the basic page rank algorithm. Many links = good site. Of course, people who want to profit gamed the system. They started to build link farms, because many links = good site, and pushed their site.

How could this look like?

I don’t have a real idea. We have to define some desired outcome. For example, for a question, we want the right answer. Now it become gritty. What is the right answer?

Let’s look at the other side of the table. What do web site providers want? Views (generally). So, the web site provider has the incentive to give the right answer if the user can penalize or reward the web site provider.

In the simplest sense, a “was this website helpful?” would be sufficient. However, the web site provider has an incentive to game his helpfulness. We have two options. a) try to fix the gaming of helpfulness or b) fixing the reward/penalty mechanism. I tend to lean to b) because a) could end in a rabbit hole. I have no good idea to fix this in the moment but if someone could fix this problem, he would swim in money shortly afterwards.

Sunk costs and education

DSC_4320 by archer10 (Dennis)

Lately, I’ve talked to quite a few people who graduated or a near graduating and observed the following:
About 70% of these people invested a ton of effort and time into getting great grades, doing internships at famous companies and traveling to other countries; mostly with the aim of keeping their career options open

There is nothing wrong with that behavior. It’s allows you to keep options open. However, now the sunk costs fallacy comes into play. What’s the idea behind that fallacy?

Sunk costs are costs which can’t be recovered. An example (from Wikipedia) is non-refundable movie tickets. You could either watch the movie, even if its horrible or just throw the tickets away and do something else. Rational behavior would be to do something else if this something else (for example, eating ice cream) has a higher utility than watching the horrible movie, even if you paid $50 for the movie ticket. The sunk costs shouldn’t influence your decision.
The fallacy is that people do include sunk costs instead of ignoring them. How does that apply to education/careers?

Let’s go back to our successful students. They finally graduated and have now the chance to choose the future career. What I’ve experienced is that they don’t want to throw away their past efforts and decided that they should rather choose a career in management consulting/investment banking/research instead of what they actually want to do; something that would make them happier. And all this just because they don’t want to have the feeling that they wasted some of their time.

Firstly, you don’t have wasted your time. See it this way: All your experience that you earned in this time helped you to come to the conclusions you have now.

Secondly, it’s quite normal to act like this, however not the best way. The underlying phenomena is loss-aversion. People try to avoid loss more than they try to get profit. Approximately $2 loss is equal to $1 earned.

Thirdly, this is what I call the second division effect/strategy. It comes from football leagues. There is the premiere league or first division where all the top players of a country play in. And there is the second division, where good but not great players play in.
The idea is this: You could either be a mediocre player in the premiere league or a top player in the second division. I personally be rather the top player in the second division. Interestingly, there is research which shows similar results for most of the population.
They were asked to choose one job. On the first job they would earn $50k but everybody else would earn $60k. On the other job they would earn $40k but everybody else would earn $30k. The majority choose the second job, the second division job.

All in all, the best thing is simply try to avoid to fall into this trap but when you gain more insight into yourself, you’ll probably be able to climb out of this pitfall.

Provide services, not just products

In the last two weeks there were some discussions about (enterprise) software sales [1, 2] on hacker news. The main complaint is that software sales are often nontransparent, complicated and highly time consuming.

I think this comment sums the problem up:

As you imply, there are segments in every market. Of course there is a segment of companies with hundreds or even thousands of employees with gigantic budgets. These guys are going to do RFP’s and spend months evaluating the different payroll providers.

Then there is the segment of small guys lik me who have under 10 employees who frankly don’t need anything too complicated. You can say “I am only going to serve large enterprise customers through a complex sales process” and that’s completely fine with me. But don’t pretend to cater to my segment if you are not to adapt your model. —labaraka

The last sentences is probably the most important. Don’t pretend to serve a segment just to be “present” in this segment. If your sales process sucks for this segment then it’s better not to serve this segment at all.
Some big software companies tried to enter the SMB market but most failed. Why? I think that it is really hard to sell for 10-20 years products to big cooperations who want customized modules, pay for consultants and don’t care if a basic module costs $100k and then to try to reduce one’s product, make it easy and create a new sales process for said businesses.
The great thing about this is that there’s always a market for software for SMB even if there are big names out there. Salesforce is such an example. At the time there were big names like Microsoft, SAP or Oracle who fought over market shares for CRM systems but Salesforce decided to gather a different market – a market where people don’t have a multiple millions IT budget or even a IT staff.
But even Salesforce can’t serve the whole tail. Still, there are companies that are overwhelmed by Salesforce’s offer or don’t feel adequately served by them.

In conclusion, as a customer I want to know that somebody cares about my company or my segment. If you are just trying to be present in a segment without really caring, people will go to other companies that care. This will allow entrepreneurs to create companies for different niches that other companies don’t really care about. Care about your customers.