Leadership: Do you get what you inspect or expect?

Prelude

The capstone ROTC class is titled, simply, "Leadership."  Mine was taught in 1998 by CAPT J.A. Fischbeck, a nuclear-trained former skipper of the USS La Jolla (SSN 701) and later the director of the Navy's Arctic Submarine Laboratory.

Our final exam was to write an essay on the topic "Do you get what you inspect, or expect?"  I chose the latter, and wrote an essay on the power of setting clear, high expectations and demanding people be accountable to them.

It was too easy, I argued, for mere inspection to devolve into a checklist mentality.  I had been on board a submarine - I think it was the USS Oklahoma City (SSN 723) - as a midshipman when its computer emergency scrammed the nuclear reactor quite unexpectedly.  Someone had gotten complacent filling out a routine inspection form, and hadn't noticed an unsafe condition develop*.

It was an... interesting... experience.  Subs are usually trimmed for slight negative buoyancy and controlled with diving planes; without propulsion an already submerged submarine will slide backward into the depths while the operators scramble to bring the emergency electric propulsion online.  The backup to the backup is an emergency blow, which we did not have to perform that day.

Plane reading, Sept 30 2015

Expert takes worth reading on economics, technology, and other interesting topics from the last week.  Plus recent news on Uber and on-demand/autonomous vehicles:


Economics and business in emerging markets

1. Alphaville, on China SOE "privatization" of a salt company is really just ownership by different SOEs
2. Alphaville, on bad debt in Indian banks - mostly in the highest areas of loan growth
3. Brad DeLong, narrating the Krugman/Hamilton debate on the likely impact of China slowdown on United States
4. NYTimes, on "India is the new China" for tech company investment/expansion due to mixture of untapped potential and openness to partnership

Economics and inequality

1. Brookings, on research showing that externally focused misbehavior in schools raises lifetime earnings even after accounting for negative impact on learning... but only for non-poverty students
2. Chris Blattman, on the astonishingly positive results from a Nigerian business plan competition that handed out about $60m worth of $50,000 prizes

Uber (Part 5) - Unit economics of food delivery

Relative to Uber's other challenges, food delivery seems like an expensive distraction unless their experiments in food delivery convince them to buy/partner with GrubHub.

A Sidecar blog post recently quoted Fred Smith, the CEO of FedEx:

“I think there’s just an urban mythology out there that an [on-demand delivery app] somehow changes the basic cost input of the logistics business or changes the patterns or the underlying business situation and that’s just not–that’s just incorrect. So great company, great concept [in reference to Uber], but I don’t think it’s…likely to be a major player in the logistics business”

The informative post then detailed the numbers behind Sidecar's multi-modal delivery system and posited that their system, when fully loaded, could deliver a package anywhere in the city for about $6.90 using San Francisco labor economics, less than half the cost of a FedEx $16 2-hour delivery:

• Cars can make 6 dropoffs/hour if they don't have to park and get out; drivers need to make about $22/hr 
• Bikers can make 4 dropoffs/hour and riders need to make about $19/hr
• Walkers need to make about $16/hr

UberEats appears to be pricing food delivery well below run-rate cost

Plane reading, Sept 23 2015

Expert takes worth reading on economics, technology, and other interesting topics from the last week.  Plus recent news on Uber and on-demand/autonomous vehicles:


Economics and business in emerging markets

1. Christopher Balding, on "official" China growth data being multiples higher than any individual component - suggesting manipulation and falsification
2. Forbes, covering the growing concerns around Alibaba's fantastic numbers possibly being falsified (and governance structure)
3. Barry Ritholz, on McKinsey Global Institute (via HBS) data showing shifting center of gravity of corporate revenue towards emerging markets 

Leadership: You get what you're willing to follow

TED talks give me the willies.  Snarked Martin Robbins (back in 2012):

TED Talks are designed to make people feel good about themselves; to flatter them and make them feel clever and knowledgeable... People join for much the same reason they join societies like Mensa: it gives them a chance to label themselves part of an intellectual elite... TED’s slogan shouldn’t be ‘Ideas worth spreading’, it should be: ‘Ego worth paying for’.

One reason TED talks are so popular is that they activate people's tendencies to, as Jonathan Haidt says, "Follow the sacral"

People who worship the same idol can trust one another, work as a team and prevail over less cohesive groups. So if you want to understand politics, and especially our divisive culture wars, you must follow the sacredness.

Perhaps my response to inspiring speeches is unconsciously a bayesian inference similar to when women see a middle-aged guy driving a Porsche: he may a car buff, but all else equal it may be more likely to assume he's overcompensating.  (an unscientific UK polls suggests about 40% actually are overcompensating.  Possibly because it's sometimes an effective tactic)

(Note: I'm not a car guy, but driving a friend's 458 convertible on the Merritt parkway a few years ago helped me understand why he is.  His Porsche is for track use only)

If everything were really that awesome, the speaker shouldn't need to work so hard to convince me.

Uber (Part 4c) - The asymptotic limits of shared vehicle costs

This is a 6,700-word post, perhaps I should have drawn a half dozen pictures with captions instead.

Among the arguments for Uber's current valuation is its option potential as the global platform for dispatching fleet-owned replacements for personally owned vehicles (POVs).  In this vision of the future, these fleet vehicles may or may not be owned by Uber.

This view is inconsistent with my understanding of operating economics.  Conventional wisdom makes several errors that artificially inflate the breakeven mileage of POV retention:

• Mis-classifying variable expenses as fixed, particularly insurance and depreciation
• Not penalizing fleet vehicles for higher variable costs
• Insurance is 2-3x higher due to higher liability limits and cancellation requirements
• Empty mileage penalty while repositioning of 10-90%
• Comparing apples/oranges car types (size, amenities, autonomy, and/or regulatory environment)

As a result, the limits of shared cost savings for Honda Civic-type fleet vehicles are much smaller than widely assumed - the POV breakeven today is less than 100 miles/month with minimally paid drivers, and about 500 miles/month with autonomous vehicles.  Even if autonomy eliminates insurance requirements, the breakeven for an autonomous Civic is about 1,000 miles/month - less if Uber retains any platform margin.

Near-term POV replacement by driven fleet vehicles is likely to be caused by external one-time variable cost avoidance such as parking fees and hassle factors rather than increased capital utilization of the vehicles.  This distinction makes a difference - for Uber, for car owners, for city planners.

Plane reading, Sept 16 2015

Expert takes worth reading on economics, technology, and other interesting topics from the last week.  Plus recent news on Uber and on-demand/autonomous vehicles:


Economics of politics

1. Princeton's Woodrow Wilson School, on the "natural" mechanisms by which income inequality is increased economies develop.  Related, evidence shows that the so-called "wage gap" rise 1978-present is "virtually all" driven by top company out-performance inter-firm rather than intra-firm social issues such as CEO pay.  The implication is that many existing programs to counter inequality are ineffective at best, and counterproductive at worst.
2. Brad DeLong, on how the above is misunderstood (or ignored) by politicians including Hillary Clinton
3. Mark Thoma, on research showing how the topic of inequality may be increasing political polarization by moving Democrats to left, replacing moderate Democrats with Republicans.  Result is more liberal Democratic party but more conservative legislature overall
4. Scott Alexander, a book review of "Manufacturing Consent" by Noam Chomsky and Edward Herman exploring how and why both the left and right believe the media is biased against them