More on Moore’s Law

If you’ve ever dealt with the advertising industry, we probably know about the cognitive threshold under which you do not gain much by advertising, and over which you enter the prospect’s mind. This threshold determines whether the prospect will be able to retain and recall anything from the information advertised.

The handicap principle shines a new light on our understanding of this phenomenon. The threshold can be understood as the minimal expenditure required to become a handicap, and honest signal of quality. The sheer amount of advertising you do. The message is not the content, but the amount. A sort of “if they can afford to spend so much money on advertising, it must be good” school of thought.

According to professor Gilbert in his Lottery winners and Dogs & Pigs on a leash papers, we go back in out memory and try to recall the frequency of images that pertain to what we want to assess. This is why you need to concentrate the message in time, and why a threshold is needed in a marketing campaign.

Model for a Cheat

A corollary to this is that there is a model for a cheat.

In the above advertising example, the cost of advertising is born by the enterprise advertising. In nature, antlers have to be regrown each mating season, gazelles cannot borrow energy from the future. There is a distinct time slot for each signal. No spill over allowed. This is the frequency (amount over time) of advertising, or antler size in a season.

You can break this model if you break this natural time slot. Ponzi schemes like Madoff’s did precisely this. They signalled success by stealing from the future. The reason us humans are vulnerable to this, and so many people get caught in similar Pyramid schemes, is probably that our brains aren’t geared to detect this effectively.

Another example can be taken from my childhood experience in my family’s summerhouse north of Copenhagen, in Denmark. Most of the houses in the neighborhood are heated with an oil furnace. You have an underground tank outside that is filled up on a regular basis. I remember one company that did this service changed its model from filling up when empty, to everyone in the same area on same day. This was very clever as people saw the oil trucks everywhere that day. They concluded that the company had to be doing well and be a good company since there was so many. They forgot they didn’t see any next 2-3 month.

In this case, the time slot is broken. The distribution over time of occurrences is uneven. The cheat is to steal from future occurrences to create high frequency point events.

So bear this in mind both when receiving and emitting honest signals. Ask yourself, where does the cost of the signal come from?

EDIT: I read Dominique Olié Lauga’s PhD thesis titled Essays in Behavioral Industrial Organization, Corruption, and Marketing, in which she argues that advertising has an intrinsic value. She comments that “this is in contrast with the view that advertising is a pure money-burning device”, referring to Nelson (1974) describing the idea of advertising signaling quality by dissipating part of the profits, that Kihlstrom and Riordan (1984) and Milgrom and Roberts (1986) formalize. This is similar to Nobel laureate Michael Spence, who first describes a model in which education does not affect productivity, then adds intrinsic value to it in a more elaborate model.

In this entry, I’ll share with you how to detect in a person what drives them.

The head of our marketing major at ESC Lille, Christophe Sempels, has brought us exceptional speakers: the first one was Arnaud Pêtre on neuromarketing, in November last year. Today, we received Pierre Moorkens on Developmental Psychology. He talked to us about humans, what drives them, and how to understand the person we have in front us. Be it spouse, friend, or colleague.

First, you must understand the distinction science makes between Character and Temperament. Temperament is acquired during the first 3 months after birth, Character is acquired onwards until between 18 and 22 years.

Temperament drives people through the pleasure they take in doing something. Character drives someone only so long as they succeed in the undertaking.

Take your relation to order. Say you just finished cooking, and your kitchen is messy. Do you clean up because you like to? Or because you don’t like the mess? Or do you think to yourself that you should clean up, but now’s not the time?

In the first case, you clean up because you like to. It’s in your temperament. In the second, you do it through aversion. You were taught or influenced in disliking messes by your relatives. In the third, you postpone cleaning up, because you don’t really care. You know it needs to be done, but there is nothing compelling to do it. If you do it because you like it, it is temperament; if you do it because you have to, it’s character; if you aren’t compelled, it’s neither.

So what?

Well, lets say you’re hiring an accountant. You ask him about what he likes in accountancy: he answers he likes precision, numbers, calculus, etc. You then put him in an imaginary scenario where he takes over from an accountant that made a poor job. His reaction to this situation will determine how he’ll fare.

If he mentions disliking numbers that don’t add up or anything similar – stay away from a hire. You are looking for someone who will see this as an opportunity to make it right.

Say your company acquired another one. If the acquired company’s books aren’t perfect or don’t match the formatting of your own, your new accountant will be stressed. And will perform poorly.

If you do something aligned with your temperament, you enjoy the process. If you do something aligned with your character, you enjoy the results. You want to hire someone who enjoys the process.

Doing something aligned with your character consumes energy, doing something aligned with your temperament produces energy. If you consume too much energy, you burn out. You then need to fall back on something that produces energy to restore morale.

So what this means is that when you are hiring someone like a software developer, try (among the many other things you need to do) to figure out his temperament. See if there is a match with the job you are offering. He enjoys making things run fast? Give him a job optimizing code. He likes making new things? Assign him to a new product development projects. This might seem trivial, but this is often overlooked.

As you can imagine, a good indicator of motivation are the person’s personal projects: the ones he does for pleasure.

Disclaimer: I did some research, and there does not seem to be any consensus on this. And I have never yet hired anyone. It rang true to my ears, that’s it. So take with a grain of salt.

In this entry, I’ll share with you the tips Pierre Moorkens also gave us on how to pull someone out from stress.

Stress is a transfer of information processing from the pre-frontal and limbic regions of the brain to the older, primitive reptilian brain. This region processes life-or-death situations, where you must Flee or Fight. There is also another form of stress, in which you inhibit yourself and seek assistance (Abandon).

Fleeing individual – recognized by his scratching himself, saying yes to everything, wanting to end the conversation. You want to position yourself as an accomplice.

Fighting individual – recognized by his eyes, fixed on you. Anger, confrontational. You want to acknowledge his grief.

Your colleague Jeff is angered by his coworker: his know-it-all attitude, his laid back attitude, everything. It’s impossible to work with the coworker. Your best shot at getting Jeff back on track is to agree with him: the acknowledge the coworker is laid back, not easy to work with, and self important. That should get Jeff calmed down, and you can take it from there.

Inhibiting individual – recognized by his eyes, looking downwards. You want to comfort him.

Eric has been missing deadlines, so you ask him what’s up. He looks down and says not much, work as usual. You talk to him about the deadlines, and he says that you should ask someone else to do the job, he isn’t fit for it. Jeff would be better. Project is too difficult, too complex. In this case, you should agree with him that the project is indeed hard, tricky, and complex. You should comfort him until you pull him out of the stress.

Disclaimer: I did some research and there does not seem to be any consensus on this. Take with a grain of salt.

The handicap principle is a hypothesis originally proposed in 1975 by biologist Amotz Zahavi to explain how evolution may lead to “honest” or reliable signaling between animals who have an obvious motivation to bluff or deceive each other. The handicap principle suggests that reliable signals must be costly to the signaler, costing the signaler in the trait being signaled in a manner that an individual with less of that trait could not afford.
For example, in the case of sexual selection, the theory suggests that animals of greater biological fitness signal this status through handicapping behavior or morphology that effectively lowers this quality. The central idea is that sexually selected traits function like conspicuous consumption, signaling the ability to afford to squander a resource simply by squandering it. Receivers know that the signal indicates quality because inferior quality signalers cannot afford to produce such wastefully extravagant signals.

You can see that there are two conditions for a signal to become honest and hence trustworthy. First, it must be costly for the signaler to produce. Second, it must be more costly to fake than not.

By meeting these conditions, the signal becomes trustworthy, and reliable.

This has many ramifications, which I’ll explore while doing research, and share this you on this blog.

It also explains many seemingly irrational or incomprehensible human behaviors: why we wear ties for business, but bowties at state dinners; why humans are the only species whose hair grows indefinitely; why clowns have round noses and witches long ones.

If you remember one thing, the handicap principle is a way to reliably signal quality.

Edit: I had a discussion about the costliness of handicaps, whether they have to be simply costly or difficult to fake. I have detailed handicap costs in a separate entry.

I’ve been asked about my thesis so many times by my entourage that I’ve decided to make a blog section about it. An added benefit to keeping a blog makes tracking progress easier, and gives the opportunity to practice explaining the somewhat complex nature of this multi-disciplinary thesis.

Lets start by some context.

I am in my final year in ESC Lille, and students are required to turn in a memoire, or thesis. There are no constraints on topics, other than they have to be somewhat relevant to our MBA.

When I worked at Intalio last year, I often asked myself why people would trust a press release when they wouldn’t advertising. I came to realize that the third party element, that added to the checks and balances of the law, was probably the reason. It filtered outlandish claims and acted as an arbiter, or so one would naturally assume. But the issue of trust and credibility remains. Will we ever stop trusting reviews we find on the Internet?

Having read Amot Zahavi’s The Handicap Principle, I was drawn in by the opportunity to re-establish trust in marketing through Honest Signaling. That is, how does nature coordinate mutually distrusting individuals into efficient situations through communication? And how can we adapt these techniques for sales and marketing?

I chose to study this in my thesis; create a toolbox for the advanced marketer to make credible marketing.

Wayne Gretzky famously said he never skated to where the puck was, but always to where it was going to be.
This adage has been part of the design philosophy for start-ups for years and increasingly it is being incorporated into the design philosophy of product development of major corporations. Even as product design and life cycles continue to shorten the inexorable march of Moore’s law makes it imperative to plan your response to a world as it will look in one or two years time. Not to the world we see today.

If companies can do this why is the present educational system incapable of doing same?
One reason is of cause the risk of being wrong. If you dig deeper into this aspect I think you will find that the argument is fallacious. It hinges on the assumption that there is a close coupling between what is being taught and what will eventually be needed by the graduates later. This connection is so far off base it is almost risible.

I am not going to expand on this here but since the people reading this are very likely to be graduates themselves, just cast your mind back and compare what concrete knowledge you had at graduation versus what you eventually got to use. (Problem solving methodologies are excluded)

Second the ones that are carrying the real risk is not the ones that is being protected by this attitude. The students are the concrete risk holders but the schools “reputation” is the real reason for the conservatism displayed.

I am an MBA graduate student at ESC Lille and one thing I do know is that any job I get will entail collaboration across geography and time. So how does my school address the need for advanced collaboration learning? By assigning team work with 2-3 of fellow class mates, to be done within a few days and with the lecture schedule adjusted accordingly. Duh!

This is not where the puck is going to be, this is hardly where the puck is now.

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