LifeGame

Real Long Term Home Values Visualized

Whenever I talk to anyone who makes their living in the housing industry... it's always a good time to buy or sell or refinance or whatever. If interest rates are low, they might go up... if they are high, they might go higher. If prices are high, they might go higher, if they are low, they might be near a bottom. It's so confusing.

This leads me to the question of how good of an investment houses are... in the long term... I mean the REALLY long term... like a hundred years or so. We just kind of assume that houses are these great long term investments and are integral to "the american dream." Maybe so, but when I look at the inflation adjusted Case/Shiller index, it looks a bit different.

 

A few things I noticed right away:

• Until the mid 1990s, a house was about a 10% or so ROI over a 100 year period, with a couple of spikes at around 30% with corresponding drops. That's not that bad really, but not amazing either.
• The great depression didn't kill home values... they were dead BEFORE the great depression.... interesting. I didn't know that at all.
• Timing badly can take a long time to recover from. 
• If you bought a house in 1895, you didn't recover until around 2001. WOW! 
• If you bought in 1912, you recovered in about 1942. 
• If you bought in 2006... I shudder to think... might be 2142 I guess? Then again we could just wait for the next real estate bubble and sell then...
• Of course if you bought in 1920s and 1930s and sold in 2006; you made about 110%... good for you I suppose.

I figure I'd be much more interested in buying a house when that blue line goes closer to 0. This is 2010 data, btw. I'll look for the 2012 data to visualize, but what I can say is that things have "stablized" well above the 1994 levels. I believe this is a result of lots of foreclosures and abandoned properties (Which the case/shiller index does not track) and as that story plays itself out we'll see more decline. It's also impacted by really low interest rates, since people generally think about how much they can pay a month, rather than how much a house "should cost" (something people don't really have an easy way to know).

 

Incidentally... this further solidifies my belief that houses are not assets, they are consumable goods. When we think a consumable good is an asset, dangerous things happen. With an asset, the more money you put in, the more valuable you think it becomes, causing you to put more money into it. With a consumable good, it's just kind of losing value over time so you don't really behave this way. Thus, when we think of consumables as assets we get really terrible bubbles: think, Tulips, beanie babies, etc. here... are Tulips REALLY assets? They are if we think they are, I guess.

Hermann

Time Management: Great Lecture from Randy Pausch ("The Last Lecture" guy).

Just fantastic.

http://www.youtube.com/watch?v=oTugjssqOT0

A Model for Managing Multi-Partner Collaboration - or: why we put our partners ahead of our customers.

I've been thinking about this topic for some time, so I'll apologize in advance for a long-ish post.

Many projects that I have worked on, and the one I'm currently working on, have the problem of multiple partners having input into a single system. This is not uncommon and, in fact, it seems that in the days of SaaS (software as a service), it's ubiquitous. Heaps of articles and management books deal with this common problem so I won't waste time recapping all those things. Instead I'll try to attack the problem from a less common point of view.

The main problem with multi-partner collaboration is that the customer's interest gets lost in the shuffle. It's true that everyone believes they have the customer's goals in mind (or at least, they should otherwise you have even worse problems) but how often do we see companies delivering features and products that no one really wanted? Is this because "the competition is stupid?" No. It's because our intuition leads us to incorrect conclusions and then our entrenchment in our position becomes more powerful than our interest in our customers.

Let's assume you have multiple inputs into a single system (a), (b), (c) and (d). Each of those represent an analysis of user behavior and then an interpretation of user value. Those can manifest in a "feature list" that is distinct for each one of those inputs. Let's say that each partner discovers 3 high value user features based on their interpretation. So you end up with:
(a) 3 features
(b) 3 features
(c) 3 features
(d) 3 features

So now you have 12 feature requests all coming from the desire of each parter's users.

Your job as the project manager is to figure out how to prioritize those features across all partners in such a way that each partner is satisfied and still keeping the development pipeline running smooth.

Let's say, for the sake of simplicity, that all these features have equal value and that your development pipeline can maintain 4 features per release (release time is relative, but let's say 4 weeks). So you now have 3 months of feature development. How do you prioritize?

In THEORY you would value all 12 features based on maximum user value and make sure those get done first, but that violates a critical reality of partner behavior. If you do that and it turns out that (a)'s features are ALL important while (d)'s features are unimportant, you now have to weight the partner relationship value against the user value. In other words, user value and partner value are in conflict. Now any good manager out there is going to call foul on that. Of course we wouldn't sacrifice user value for partner satisfaction! Or would we?

Well, we would never do that explicitly, but we would hold long meeting to determine the value of the 12 features during which partners would jocky for their features and try to squeeze in as many of theirs as they could. The reason? They know the development pipeline is lean and they know that if they don't get their features in now, they may never get them in. Worse, the person who is representing their features may be "scored" at their own organization based on their ability to drive the priority of their features. Few people would assume that their 3 features could be LESS important than someone else's list. Of course they are important! We know our customers better than anyone! We must be right! Or are we?

Let's assume that each featureneed 3 hours of estimation and 1 hour of discussion for prioritization. Total cost of estimation and prioritization is 36 hours + 12 hours, so 48 hours of work to evaluate the complexity and prioritize those features. Those hours create a lot of commitment to individual partner's positions. It's very hard to change course when you've spent hours and hours discussing and planning things. So after these 48 hours where are we?

We've got a plan for the next 3 months of features. We've prioritized the tasks for what we believe is user value (although there's probably a lot of partner satisfaction trumping user value going on, but we don't measure that well, do we?). We've got "sign-off" on priority from all interested parties. We've got good estimates from our developers. We've got a green light. Everyone is aligned, right? But what about the customer? Is she aligned? Did she "sign off?" Does she have a "green light?" How do we know?

This is pretty fail in my opinion. Why? Because the true user value is buried under several layers of management decision making. How can we be sure we're really working on the right thing? We've focused on partner satisfaction, estimation and prioritization - scoring "points" instead of building value.

Why did we do this?

Exposure.

Our partners are "in the room" with us - or in the virtual room. They are pressing their position, they are challenging our assumptions, they are asking questions about what is possible and why. They are shaping our decisions and our world on a minute by minute basis while our customers are patiently waiting for their increase in value. In effect, the more partners we have representing our users and the bigger and more complex our project becomes, the more likely the customer's value is to get lost! Our customers don't have the same exposure to us. It's much easier for us to disappoint our customers than it is to disappoint our partners, and we created a system to ensure this is so. This is all backwards.

It's like one of those reality TV dating shows. In the context of the contest, the participants will kill themselves and each other to be with the person. Then, once the cameras go out, and the competitors are defeated, that dream date doesn't look so good anymore. We want to win so badly we forget the value of the actual prize. This behavior goes all the way up to hot-shot managers on multi-million dollar projects.

I can see the post-mortem now:
"Bob. Why on earth did you spend all that time fighting for that feature that no one wants?"
"Well, it seemed really important at the time."

Oops!

 

 

Our model for collaboration must force us and our partners to put our customer's experience at the center. There's a lot of ways to do this:

1. Force all feature requests to tie back to measurable user value.
2. Estimate value based on total development cost in relationship to user value (instead of difficulty and partner value).
3. Force parters to weigh their own and each other's requests based on measurable user value.
4. Directly ask your customers which of ALL features they value the most - and then force all partners to work together and prioritize.

That's all well and good - and I'm sure you can come up with more, but that's not the point.

The point of all of this is to remind partners that they and we must protect each other from losing sight of customer value. Our natural inclination will be to satisfy each other and to win points for our respective organizations. It's everyone's job in management to build systems that optimize around customer value: how to measure it, how to protect it and how to increase it. I think that's one of the major reasons small companies disrupt big ones. Less people and less layers between developer and customer lead to greater development efficiency - not in terms of time per feature, but in terms of time per unit of customer value. Small companies don't have time or money to spend on "professional research" or "marketing analysis" (both extremely useful, btw) and instead have to rely on their customers directly. This direct dialog is, itself, of huge value and makes it hard for them to ignore their customers. Also, small companies have fewer resources so if they ignore customer value, they go to the graveyard very quickly and don't survive to write award winning books on management strategy.

I would force partners to be customers. Force your partners to use your software IN the planning and strategy meeting. Force everyone to see what is good and what is bad. Grab the "top list" of "important features" and make sure they pass this test. It's AMAZING how frequently really important things suddenly are reduced to piles of trivia and incredibly high value customer facing features are ignored. Is that new billing interface REALLY more important than the annoyance of having to scroll to find the submit button? Maybe to the guy trying to make his sales numbers, but not to the guy submitting the form... Who is more important?

So... in all your important strategy and planning meetings, please don't forget about the customer value... and, more importantly, don't forget how easy it is to forget about the value. Ask your partners to help remind you. When in doubt, grab all the partners, sit down and use the software for a while or, better yet, watch someone else use it. Then have that prioritization meeting...

The Monk and The Warrior - A Tale of Heaven and Hell

Shaun the mighty warrior was troubled and went to seek out the wise monk Shem. Upon finding him near a tranquil river Shaun asked "Oh wise and nobel Shem, I am troubled by thoughts of the afterlife and all the things I have done. Good and evil... is there truly a heaven and a hell?"

Shem replied dismissively "YOU are a warrior for the king? Truly only a great fool would trust the kingdom to someone as foolish as you. I suppose you can take solace in knowing that there is at least one in the land even more foolish than you."

Shaun replied angrily "Why do you say this? How dare you call me a fool! How dare you insult the king! I am a great warrior. I have done you no wrong. Apologize or I shall slice off your head!"

Shem remaining silent.

Shaun growled impatiently and began to un-sheathe his sword. "Very well, I shall make you pay for your disrespect!"

Without moving, Shem said "...and thus do open the gates of hell."

Stunned, and realizing his foolishness, Shaun put his sword back into it's sheath.

Shem replied "...and thus do open the gates of heaven."

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Perfect Storm for a Big Financial Crunch

I just read this article on MSNBC entitled "Baby Boomers facing retirements in jeopardy" and that's about all you need to know. Basically, the two great American dreams (1) the eternal rise of housing prices and (2) the eternal and reliable increase in the stock market both dropped off the end at precisely the same time that baby boomers are going to retire... 10,000 per day for 19 years. That's a lot of people. If you consider the S&P is up about 4% for the decade and we don't even need to discuss what your house might be worth... AND you combine that with a drop in the savings rate of about 10% in the 70s and 80s to -1% in the last decade... well... it's not good news for anyone.

As a 35 year old male hitting what is supposed to be the prime of my income potential... and someone with a higher than average savings rate, it's very concerning. My generation has less children and may have to support a lot of people who are completely unprepared for retirement. People with little or no assets... people with children with little or no assets... people who vote. If I were a betting person I would predict that large tax hikes are on the way... and they are NOT going to go to infrastructure improvements or for the benefit of education... or defense or paying down the debt for that matter.

The fact is we spent the last 30 years living WAY above our means and now we're going to spend the next 30 living below our means just to stay even with the huge debt we are carrying around. I don't see budget surplusses and decreases in the national debt anytime soon.

I'm not really interested in the blame game. Should people have saved more? Yes. Should we have exercised fiscal discipline? Yes. Does knowing this now change the past? No.

So what to do? I think we just have to prepare to pay the price. We're going to have less money... maybe a lot less. People are ultimately going to vote in self-serving ways... even to their own pain. If you're 63 years old, can't get a job in the 10%+ unemployment economy, can't retrain your skills in time for it to matter, have massive debt and medical costs and your only way to survive is social security... guess what you're political platform is? If you're a politician who needs votes to get elected, guess what your most important issue has just become?

Happiness for the Holidays and the Importance of Zen

We wish it to each other at this time of year, perhaps more than any (at least if you are a member of Western Civilization), but what is it we're wishing?

Intuition and behavior are parallel for a while but then diverge strongly. When people are "poor" more things do indeed make them happier. Once above that threshold, however, it doesn't make much difference. In fact, nothing much does. Here's some books explaining why. 

I'm interested in something different, though. I want to know why people are so interested in happiness as a state. We're obsessed with it and I think it's an outgrowth of conspicuous consumption which began around the 1920s (it existed before, but not at such scales). Amazon returns about 2700 non-fiction books with the word "happiness" in them (about 800 for "satisfaction," 516 for "productive" and 280 for kindness). Ok, so aside from a non-scientific study of Amazon's book choices, why does this matter?

We tend to see our lives as a state rather than a process. We are happy or we aresad or satisfied or whatever. But this is not how it happens in experience. Happiness, sadness and satisfaction are relative measures of change over time. They are emotional calculus. You can't "be" happy, you can only transition your relative happiness index, if you will. Thus, you need to actively integrate unhappiness and dissatisfaction into your life. I'm not saying you have to do things that cause that, but rather that changes in happiness and satisfaction are just part of the human experience.

In Zen, there's this kind of constant idea that seeking zen results in physical punishment. Walking up to a zen master and asking him how to find enlightenment will result in him smashing you on the head. In this way Zen seems like a kind of gag religion where the "master" provides you with a near endless list of meaningless tasks to perform. But something else is going on here. "Looking for" something implies that you and the object of your desire are somehow separated. This separation is created by your mind - it doesn't exist in the "external" world (which we only know through our senses anyway). The act of "looking for [x]" is what separates you from [x]. Thus, the idea is to find something you have to not look for it. Of course, the zen master is smart... he understands the difference between you not looking for something and you trying to not look for something. Trying to not look for it is still looking for it, which creates the separation - and the requisite knock on the head.

What you do is create barriers that you then have to break down. If you think you need a zen master to give you 10,000 meaningless tasks to do before you think you "earn" enlightenment, then that's what he's going to let you do. If you don't think you need that, then you don't. It's already there and you're just playing a game that it isn't. You think that he is the one playing the game, but really you are. If you say "why do you keep making me do these stupid tasks" he'll smack you on the head again - because it's you making yourself do those stupid tasks and he's just frustrated that you keep insisting you need to do them.

It's not that happiness is the elusive thing we need books and studies to find. It's just a part of the rich human experience - always there, ready to be experienced, we just need to convince ourselves to not build up the barriers in the first place.

So, going back to the start. Intuitively we know that more stuff and more money and more whatever will not make us happy (neither will less). In practice, though, we spend most of our lives in pursuit of precisely those things. This dichotomy creates a kind of psychosis from which there appears to be no escape. I think the more compelling model is to stop looking for what will make us happy or satisfied and instead just see it as a series of different experiences all of which have value.

C G Jung saw this in his treatment of undesirable human psychological behaviors. For years people would hide from their "evil" similar to how we avoid "unhappiness." His idea was to "integrate the evil" by bringing it to the forefront. Repressions and ignorance only make these negative experiences stronger. Until we understand them to be another part of the human experience it's difficult to get out of this psychotic state.

This manifests itself in nearly every culture in the form of popular myth or religious text. I would argue that Jesus' confrontation with Satan is this act of integrating the evil, though we have now confused it with suppressing the evil. Jesus doesn't run away or suppress Satan, he directly confronts the temptations the lie before him and in doing so dispells theillusion. Eating, power and even surviving a fall are not important once you have integrated yourself into everything else. The idea of having dominion over the earth is rediculous if you see youself as integrated into it. I'm not going to go into a long monologue about this but I think that what we see here is the intuition that we see one thing at the expense of not seeing another. I think it's a great and basic human myth that echos in our minds.

The Myth of Security Continues

The "news" is still bathing in the excitement of the last terror attack. Especially with new information that seems to come out every couple of days. A good summary of how this is working is on the link below:

http://www.msnbc.msn.com/id/34592031/ns/us_news-crime_and_courts/

What's amusing about all this coverage is I have not found a single mainstream news source that does any kind of analysis on how dangerous terrorism is or evaluates how the "threat of terror" has changed over time. They simply discuss broad generalizations about how "security has failed" which has now prompted new legislation to "improve security."

This is another example of legislation being driven by public opinion (which is itself driven by fear and over-estimation of risk in this case) with little regard for any kind of analysis or serious debate.

So let's think about this for a second. The "database of people with suspected terrorist ties" is now over 500,000 people. Abdulmutallab (the suspect) was, in fact, on the list. His father had even pro-actively gone to the embassy claiming that his son was a threat. Since he was not detected by the various security mechanisms, the mainstream thought has concluded that the list and detection mechanisms do not work. The "solution" of course is to make and invasive and broad system even more invasive and broad. The database will grow larger and the invasiveness will become deeper. What evidence do we have that this works? Very little.

The problem, in essence, is that the threat of terror is simply not very large. It's just not that dangerous and terrorists are simply not that common. Blasphemy! Even if there was a full-on 9-11 style attack every year, it would not be on the top 10 list of life-threatening fears. Why spend so much time on it? Sure, every few years some lunatic will blow up a building, planes or what have you and kill a few thousand people. Should we really adjust our lives around these events? We care because of the intensity of the coverage, the unusualness of the event and the loss of control; NOT because of the empirical dangers of terror.

Lets compare terror attacks to car accidents. Imagine if there was only one car accident every 10 years but it killed 10 million people. Do you think that would get much coverage? Do you think that it would create massive legislation slowing speeds to 20 MPH in order to "prevent such events of massive horror in the future." Now imagine there was ALMOST another accident that ALMOST killed 5 million people. Oh no! The speed limit legislation didn't work! The police checkpoints are not effective. Let's slow speeds down MORE, lets add more checkpoints! We have to stop these car accidents from happening before our whole way of life is threatened! I suspect that if someone suggested legislation of that kind, they would be ridiculed.

From a purely numerical analysis, we should treat "death by terrorism" as simply a cost of existing in a free democracy. We know that we might get killed by a drunk driver - a horrible, unexpected event beyond our control. Do we therefore think we should ban drinking? Should we put checkpoints every mile to make sure "no one is ever killed in this horrible way ever again?" No, it's simply an accepted danger of living in an unpredictable world.

This would normally be just another silly example of people over-reacting to a rare event, stirred into a frenzy by a commercially driven media and a government that has to reflect those social facts. The problem is that there is a general problem where we pay massive costs for having large sections of legislation around singular rare events which we can not prevent anyway. This comes at the cost of preventable, much more dangerous but less singular threats. For example, consider the strides that could be made in cancer, childhood diabetes, heart disease, obesity and a host of other fatal conditions that get far less attention. Imagine if the funds that go against fighting "terror" went to fighting "diabetes." I suspect we would have a much safer world.

Of course, there is the argument that if we didn't spend on the "war on terror" that terrorists would be running around the country bombing at will... killing millions of innocent people, imposing sharia law and converting all of our Christian values into some kind of pro-terror Islamic fundamentalism. Since it's not possible to prove a negative, I can't really dispute that claim. It's possible that because of McCarthyism, the evil communists didn't overrun the country and it's possible that because of the Spanish Inquisition, witches didn't take over the world. To those arguments I simply enact my logical mind and determine that such cases seem very unlikely and if I am faced with the fact that x millions of people will certainly die because of cancer and heart disease, vs. a few thousand who MAY die because of terrorism, and the associated costs on my freedom, I'm going to advocate that the legislation and money could be far better spent. In this line of thinking, if terrorism actually became a substantial killer we would then reply with matching defense mechanisms.