Most Effective Over the Counter Cold Remedies

Scott BuchananLeave a comment

Cold symptoms are personally unpleasant, and also have economic aspects. In 2011, Americans directly spent some $40 billion on cold medicines, and the societal costs of workers and students staying home are much greater.

Having dealt with one or two colds a year for quite a few decades, I have
significant experience with cold remedies. Also, being a habitual researcher, I have nosed around the internet looking at various studies of the effectiveness of medications.

The biggest problem I have with colds is the nasal drippage at night. In the daytime, I can just blow my nose, but at night this can keep me from sleeping, and also leads to nasty coughing and even bronchial infection if the stuff goes down into my lungs.


There are various so-called first-generation antihistamines out there. They all have some sedative affects. Second-generation antihistamines (e.g. fexofenadine, loratadine, and cetirizine) have fewer sedating qualities, since they do less crossing of the blood-brain barrier, but they tend to be only effective for allergies and less effective for colds.


The best antihistamine for colds which I have found, which seems to be confirmed on the internet, is chlorpheniramine maleate. This was the key ingredient in classic Coricidin, and now appears in Coricidin HPB. HPB stands for high blood pressure. It seems to be always accompanied with some acetaminophen (Tylenol).

(Side comment: the internet seems to say that in general antihistamines are not a problem for people with high blood pressure. Decongestants are. I guess the manufacturer turned the lack of a decongestant in this formulation into a virtue, by calling it “safe for high blood pressure.”)

Coricidin HPB exists in many different incarnations on drugstore shelves. The one I go for is the Cold and Flu package, see below. It just has the chlorpheniramine maleate plus acetaminophen:

Most of the other variants have the word “cough” in the title, such as “Cough and Cold,” and contain dextromethorphan cough suppressant. I find the combination of the dextromethorphan plus the antihistamine to be extremely soporific. In my medicine cabinet I label them “zombie pills, since they leave me feeling torpid even 24 hours after taking them. The plain antihistamine version (Cold and Flu) also slows me down, but not nearly as much as the cough suppressant version.

I have also found generic versions (e.g. CVS brand) of chlorpheniramine maleate. However, less than half the pharmacies I check have this stuff on their shelves, for some reason. I guess it is not as heavily promoted as the Vicks NyQuil, which contains the heavily sedating doxylamine succinate (active ingredient in Unisom sleep aid) as the antihistamine component.

I recently ran across an article by Parkview Health which happens to come to the same conclusions I have. I will share their recommendations here in italics, with a little further commentary of my own. On antihistamines for runny nose:


In patients older than 12 years of age: Nyquil™ (doxylamine succinate), Tavist (clemastine fumarate), chlorpheniramine maleate or Benadryl® (diphenhydramine) may help relieve symptoms, although these may cause sleepiness. Chlorpheniramine maleate is the least sedating of the products listed above.

For Nasal Congestion:

The best oral medication would be Sudafed® (psudoephedrine) [sic], which is a medication behind the counter in the pharmacy. There is a medication that is similar and available over-the-counter, Sudafed PE® (phenylephrine), but it’s not nearly as effective as plain Sudafed®. These medications have precautions in some disease states so it is best to consult your physician before treating your nasal congestion.

The best nasal spray medication is Afrin® (oxymetazoline) and while this medication is very effective. It should only be used for 3 days due to the potential side effect of rebound congestion.

Nearly all the meds on the drugstore shelves for stuffy nose use phenylephrine, which is known to be essentially useless. Go figure. Anyway, go for the good stuff, the pseudoephedrine. I use the 12-hour slow-release formulation, keeps me going all day. This med does jazz up your nervous system, so some folks may find the racing brain to be unpleasant. Truck drivers use it to stay awake at night, but for the rest of us, don’t take this at bedtime.  I take the antihistamine at night (half hour before bedtime, and typically once in the middle of the night, since it only lasts about four hours), and the decongestant in the morning.

If I can’t afford to be slow-brained the next day, or if I am at peak nasal congestion, I might use the nasal spray at night once or twice, but I know from experience that using it too much leads to permanent stuffiness.

Pseudoephedrine can be used in the manufacture of methamphetamine, so you can’t just load up your shopping cart with boxes of it. In the U.S., you typically have to go to the pharmacist’s counter, and they dole all out maybe two boxes at a time, noting your driver’s license, and entering it into some national database.

I’ll let the good folks at Parkview Health offer the closing wisdom here on cold and flu meds:

Cough:

The best way to address cough is to assess what kind of cough it is. When you cough is it dry and non-productive? Or is it wet and mucus exits with the cough?

If the cough is dry and non-productive:

  • Utilize Delsym® (dextromethorphan)

If the cough is wet and produces mucus:

  • Drink water to make the mucus thinner
  • Utilize Mucinex® (guaifenesin)

Fever/Sore throat:
The best medication for fever and/or sore throat is plain Tylenol® (acetaminophen) or NSAIDs such as Motrin® (ibuprofen).

What medications are best to treat the symptoms of the common cold in children?
Many medications that are used in the common cold for adults should not be used in children because there have been few trials supporting their use in infants and children. Therefore, the best treatment is Children’s Tylenol® (acetaminophen) or Children’s Motrin® (ibuprofen) for fever or uncomfortable symptoms due to the common cold.

Other than the medications listed, the best way to help your infant or child get rid of the common cold is drinking an adequate amount of fluids. If further help or direction is needed, contact your physician.

What medication(s) are best to treat the flu?
Unfortunately, the flu is much harder to treat over-the-counter, as there aren’t medications to really treat this viral infection. The best measures to take are to get plenty of rest, drink enough fluids and utilize Tylenol® (acetaminophen) for fever.

There are medications that can be prescribed by your physician to help shorten the duration of the flu although studies have shown the medications shorten the flu by only a day.

The best way to prevent the flu by getting the flu shot

Other Types of Cold Remedies

The above discussion covered plain vanilla, non-prescription (over the counter) medications. There are other more exotic and expensive meds to be had by prescription, as well as a plethora of folk remedies. Here is a link to about a dozen such nostrums, such as garlic and cognac, vinegar and cayenne pepper, and sauerkraut.

How to destroy or save a discipline

mdmakowsky3 Comments

Alex Burns recapped a conference session about the market for PhD students in History. It was, predictably, rather despondent as is the nature of the job market for all graduate students in history, but doubly so for those outside the absolutely most elite 3 to 5 schools. The whole thread tells the story of graduate education in history, and the broader humanities, with sincerity and empathy.

Now, if I were a respectable economist, I would note that discussed plans to increase the supply of graduate student labor in a market with already paper thin demand is most certainly not the answer. Economists rarely pass up the opportunity to roll their eyes at any academic failing to understand supply and demand, but fortunately Christopher Jones (a proper historian) already made the appropriate observation:

What caught my eye, however, was the noted recommendation that faculty stop identifying scholarship in their field as a viable career altogether:

This makes my blood run cold for a number of reasons. First, its a trap whose bait is appealing to those students who are simultaneously the most earnest and most insecure. Unsure of what life will be like after college but know in your heart that you loved your classes in rhetoric or 16th century literature? Then why not make the noble decision to forsake the material world for a life of the mind? That’s exactly the kind of trap that makes for the pompous 23-year olds who turn into angry and despondent 30 year olds.

Perhaps worse, however, is the forsaking of an entire discipline that once held the mantle of profession and might now resign itselft to the standing of a hobby. I’m a STEM-y, arrogant economist who consumes very nearly no pre-19th century literature but that doesn’t mean I don’t think the deepest understanding of the foundations of a culture, any culture, doesn’t have profound insight to offer future generations. There is value there, the kind that might even qualify as a public good, whose provision we might want to collectively support, if we so chose.

It’s especially frustrating, however, because I can’t help but think the answer is right in front of them. It just happens to be nearly the inverse of the first suggested policy. History and the humanities need to reduce the supply of graduate students. That’s all there is to it. Yes, research and teaching will be more slower and more arduous without as many graduate assistants. It’s a tough break, but it sure as hell seems a more modest price to pay than the abandonment of scholarly training as something that leads to a viable career. I’d also like to very much hope that it would ease the conscience of faculty taking on graduate students as assistants, then thesis advisees, knowing that 5 years of laborious apprenticeship isn’t destined from the beginning to end in tears. You’ll have fewer graduate students, but hey, at least now you’ll be able to look them in the eye.

There’s a term in urban development: shrinking to greatness. A city can in fact shrink in population and still come out the other side viable, even potentially stronger than ever. That’s the story of Pittsburgh. Embrace what you are, not what you used to be or wished you were. There are a lot of disciplines and subdiscplines that are going to destroy themselves trying to become the STEM fields they wished they were or the recreate past golden ages of dubious veracity. But there will be some, across fields or within single universities, who will recharacterize themselves as custodians and curators of scholarship whose demand may have shrunken, at least for the moment, but whose contributions can carry forward. If that means at a slower pace or smaller scale, so be it. Better to embrace what you are than recruit the naive as kindling for a bonfire lit by arrogance and denial.

Books the 8-year-old likes

Joy Buchanan2 Comments

One of my personal interests is encouraging my kids to read. This is a list of books that my 8-year-old son really likes.

If you count Calvin and Hobbes as reading (it’s a comic book), then it is his first love and continues to be a favorite.  

Calvin and Hobbes (Volume 1) Paperback

The Calvin and Hobbes Lazy Sunday Book (Volume 4)

These next two are STEM-friendly goofy books with lots of pictures to break up the text. Currently, if he has to do independent reading time, these are first choices.

Big Bangs and Black Holes: A Graphic Novel Guide to the Universe

The 39-Story Treehouse

These chapter books are prime read-aloud choices for us to read to him that hold his interest.

The Phantom Tollbooth

The Silver Chair

Ender’s Game – Still incredible. Still feels futuristic, although the emphasis on “smart desks” instead of “smart phones” is funny. It was published in 1985.

The Great Brain

Bonus, for 5-year-olds:

The 5-year-old picked out “Woodpecker Wants a Waffle” at our local library and has been delighted by it. It’s a funny picture book that holds up to re-reads. See if your library has it. Public libraries are especially great for 5-year-olds who are ready to explore beyond the Dr. Suess classics at home but also not able to commit to any books worth buying.

Wanna Teach Economics?

Zachary Bartsch1 Comment

At Ave Maria University, we have an open economics faculty position. Indeed, it’s late in the job market and we haven’t settled a match. That’s what accounts for my late post. I interviewed someone today when I otherwise would have been grading. So, I spent my evening writing feedback on papers (pleading for greater concision).

We are a small department at a Catholic liberal arts school. When staffed, we employ 3 full time Econ faculty plus 1 or 2 adjuncts. We’re primarily a teaching university, teaching 3-class loads each semester. The students are great people. They have better moral fiber than I did at their age and the Econ majors tend to be smarter and more capable than I was at their age.

The university is located in Ave Maria, Florida which is a small town near Naples, the very wealthy destination of snowbirds and retirees. Most faculty live near the university, send their kids to the nearby private school, and attend the same masses. There is a lot of community here.

We’re happy to take economists of almost any specialization. A focus on micro or stats or data analysis would be a plus. The link to apply is below. I’d be thrilled to learn that this is how we met.

https://workforcenow.adp.com/mascsr/default/mdf/recruitment/recruitment.html?cid=70cb71c1-96f8-4956-8cce-ce625b0b2943&ccId=19000101_000001&type=JS&lang=en_US&jobId=466997

The Best Personal Finance Books

James Bailey5 Comments

Last week Scott offered a very negative review of one popular personal finance book, Rich Dad Poor Dad. My own take on the book is less negative, but I still wouldn’t recommend it to most people. That still leaves the question of which personal finance books are worthwhile. I gave my answer back in 2020 in a post on my personal blog. You can read the full reviews there, but I’ll give my short answers here:

I Will Teach You to Be Rich

Despite the title, the book is really about the basics of how to get out of debt, save for retirement, and manage credit. The material is stuff most people will figure out on their own by their 30’s or 40’s, but it’s a nice presentation all in one place and can save people from learning lessons the hard way. Perfect for a college student, someone at their first real job, or someone older who feels like they missed the memo on how all this works. His big idea is that once you set and meet good savings goals, you don’t need to feel guilty about the things you do spend money on.

The Millionaire Next Door

This book is built around surveying millionaires and finding the commonalities in what they did to get wealthy. The core idea is that Americans with millions saved tend to have moderately high incomes but very high savings rates. Even someone with a normal income can become a millionaire- income is different from wealth. The key is to live frugally and let the compound returns on your savings work for you. The original version of the book is inspiring, but has out of date numbers; the author’s daughter recently updated it (The Next Millionaire Next Door) with more current numbers.

There are many more books about how to invest, but for broad takes on personal finance overall these are the best two I have found, and the ones I recommend to students. Still interested to hear your thoughts on more recommendations.

Food Inflation in the G7 and Russia

Jeremy Horpedahl1 Comment

Food prices are up a lot in the past few years. I’ve written about this several times in the past few months. In the US, we’ve seen grocery prices go up 20% on average in just 3 years. That’s much higher than we are used to: in the decade before the pandemic, the average 3-year increase was just 4%. In fact, the 3-year increase was negative for much of 2017 and 2018. To find increases this big, you have to go back to the late 1970s and early 1980s (when sometimes the 3-year grocery inflation rate was almost 50%).

But if it’s any consolation, this is not a problem that is unique to the US: food prices are up around the globe. That’s a relevant insight when we come to a recent viral video from Tucker Carlson’s visit to a Russian grocery store. Carlson says that the inflation and cost of groceries will “radicalize you against our leaders.”

So what has food price inflation looked like in Russia, the US, and the other G7 countries? (What used to be called the G8, until Russia invaded Crimea in 2014.) Here’s the chart:

Cumulatively since January 2021, when our current “leaders” came into power in the US, food prices are up 20% in the US, as I said above. But notice that this is on the low end for this group of countries. Japan, with consistently low inflation and occasionally deflation over the past few decades, has been the lowest over this timeframe (though even in Japan, food prices are up about 7 percent in the past year).

But notice who is the highest: Russia, where grocery prices are up 32% in the past 3 years. Certainly, their invasion of Ukraine and the resulting global sanctions plays a role in this, but even if we look at early 2022, the cumulative 15% food inflation was much higher than any G7 country.

So blaming our leaders for rampant inflation is probably not a good idea, especially if you are trying to portray Russia in a positive light.

Perhaps the more charitable interpretation of Tucker Carlson is that the nominal price of groceries is lower, rather than the rate of inflation (even though he does mention inflation in the video). The basket of food they purchase in the video comes out to the equivalent of about $100 at current exchange rates. Everyone on his crew guessed it would be around $400.

I can’t say whether their guess of $400 was accurate, but it would not be totally surprising if the prices of non-tradable goods were lower. This is what would expect in a country with lower wages. While we normally think of services as non-tradable, it’s also reasonable to assume that a lot of fresh food, such as produce, bread, and dairy, is also non-tradable (at least not without high transaction costs).

Carlson’s claim that people “literally can’t buy the groceries they want” is a much more apt statement of the state of affairs in Russia (and other poor countries) than it is in the US and Western Europe.

We can see this in a few ways. For example, here’s a chart showing the percent of consumer spending that goes to groceries:

The average Russian allocates about 30% of their spending to groceries, similar to the Dominican Republic. And this data is from 2021, just before the massive spike in food prices in Russia. Meanwhile, the US is by far the lowest, at just under 7%. The UK, Canada, and Switzerland are the closest to the US, but they are in the 9-10% range. Food in the US is cheap.

And those high average levels from Russia obscure a wide-ranging distribution of food insecurity. In a story from Russian state-owned news agency TASS, they report that over 60% of Russians spend at least half of their monthly income on food. Even Putin is publicly acknowledging that inflation is a problem.

The food inflation we’ve experienced in the US has been bad, the worst in a generation. But it’s not exactly clear that our “leaders” are to blame. And it’s also pretty clear that it’s much worse in the rest of the world, especially in Russia.

Stock Options Tutorial 3. Selling Options to Generate Extra Income

Scott Buchanan3 Comments

In the first installment of this series on stock options, I focused on buying options, as a means to economically participate in the movement of a stock price up or down. If you guess correctly that say Apple stock will go up by 10% in the next two months, you can make much more money with less capital at risk by buying a call option than by buying Apple stock itself. Or if you guess correctly that Apple stock will go down by 10% in the next two months, you can make more money, with less risk, by buying a put option on Apple, then by selling the stock short.

In part two of the series, I discussed how options are priced, noting the difference between intrinsic value, and the time-dependent extrinsic value.

Here in part three, I will discuss the merits of selling, rather than buying options. This is the way I usually employ them, and this is what I would suggest to others who want to dip their toes in this pond.

Just to revisit a point made in the first article, I see two distinct approaches to trading options. Professional option traders typically make hundreds of smallish trades a year, with the expectation that most of them will lose some money, but that some will make big money. A key to success here is limiting the size of the losses on your losing trades. It helps to have nerves of steel. Some people have the temperament to enjoy this process, but I do not.

Selling Out of the Money Calls

Instead if spending my days hunched over a screen managing lots of trades, I would rather set up a few trades which may run over the course of 6 to 12 months, where I am fairly OK with any possible outcome from the trades. A typical example is if I bought a stock at say $100 a share, and it has gone up to $110 a share, and I will be OK with getting $120 a share for it; in this case I might sell a six-month call option on it for five dollars, at a strike price of $115. The strike price here is $5 “out of the money”, i.e., $5 above the current market price.

There are basically two possible outcomes here. If the price of the stock goes above $115, the person who bought the call option will likely exercise it and force me to sell him or her the stock for a price of $115. Between that, and the five dollars I got for selling the option period, I will have my total take of $120.

On the other hand, if the stock price languishes below $115, I will get to keep the stock, plus the five dollars I got for selling the option. That is not a ton of money, but it is 4.3% of $115. If at the end of the first six-month period I turned around and sold another, similar six-month call option which had the same outcome, now I have squeezed an 8.6% income out of holding the stock. If the stock itself pays say a 4% dividend, now I am making 12.6% a year. Considering the broader stock market only goes up an average of around 10% a year, this is pretty good money.

At this point, you should be asking yourself, if making money selling options is so easy, I have I heard of this before? What’s the catch?

The big catch is that by selling this call, I have forfeited the chance to participate in any further upside of the stock price, beyond my $120 ($155 + $5). If at the end of six months, the stock has soared to $140 a share, but I must sell it for a net take of $120, I am relatively worse off by selling the call. I have still made some money ($20) versus my original purchase price. However, if I had simply held the stock without selling a call option, I would have been ahead by $40 instead of $20. And now if I want to stay in the game with this stock, I have to turn around and buy it back for $140. This decision can involve irksome soul-searching and regrets.

There are two techniques are used to reduce these potential regrets. One is to only sell calls on say half of my holdings of a particular stock. That way, if the stock rockets up, I have the consolation of making the full profit on half my shares.


The other technique is to try to identify stocks that trade in a range. For instance, the price of oil tends to load up and down between about seven day and $90 a barrel, barring some geopolitical upset. and the price of major oil companies, like Chevron or ExxonMobil, likewise trade up and down within a certain range. If you sell calls on these companies when they are near the top of their range, it is less likely that the share price will exceed the strike price of your option. Or, if it does, and you have to sell your shares, there is a good chance that if you just wait a few months, you will be able to buy them back cheaper. On the other hand, a stock like Microsoft tends to just go up and up and up, so it would not be a good target for selling calls.

Some Personal Examples

From memory, I will recount two cases from my own trading, with the two different outcomes noted above. ExxonMobil stock has been largely priced between $95 and $115 per share, depending mainly on the price of oil. In early 2024, with the price of XOM around 117, I sold a call contract with a strike price of 120 and an expiration date in January, 2024. I think I got around $9 per share for selling this option. The next twelve months went by, and the price of XOM never got above 120, so nobody exercised this call contract against me, and so I simply kept the $9, and kept my XOM shares. Since each contract covers 100 shares, I pocketed $9 x 100= $900 from this exercise, covering 100 shares (approx. $12,000 worth) of XOM stock.

That was the good, here is a not so good: I bought some ARES (Ares Management Corporation) around February 2023 for (I think) around $80/share. For the next few months, the price wobbled between $75 and $90, while the broader S&P 500 stock index (lead by the big tech stocks) was rising smartly. I lost faith in ARES as a growth stock, but decided to at least squeeze some income out of it by selling a call option for about $10 at a strike price of $110 and a distant expiration of Dec 2024.

What then happened is ARES has taken off like a rocket, sitting today at $132/share. If it keeps up like this, it may be well over $150 by December, 2024. I will likely have to sell my 100 shares for $110 (the strike price), so I will get a total of $110 + $10 = $120 for my shares. That is far less than the current market value of these shares. I am not crying, though, since I have some more ARES shares that I did not sell calls on. Also, getting $120 for the shares I bought for $80 is OK with me. There is a saying on Wall Street about being too greedy, “Bulls make money, bears make money, pigs get slaughtered.”

Selling Puts

Briefly, selling out-of-the money puts is like selling calls, on the buy-side instead of the sell-side. It is a way to generate a little income, while garnering an advantageous purchase price, if things go as hoped. In my ARES example above, suppose my 100 shares get called away from me, when the market price is $150. I have various choices at that point. I could simply by a fresh 100 shares at $150, or I could get onto other investments. Or, if I were not happy about paying $150, I might sell a $140 put for say $6 per share. I would have to be OK with either of two outcomes: (1) either the price drops below $140 and the buyer of my put option forces me to buy it at $140 (in which case I need to have $140 x 100= $14,000 in cash available) , though net the stock will only cost me $140 – $6 = $134 ; or (2) the price stays above $140 and I simply pocket the $6 option premium.  And I have to be willing to live with the regret if ARES goes on to $180, in which case it would have been better to have simply bought shares at $150 instead of dinking around with options.

So, there is no one-size-fits-all approach. Again, I prefer to sell puts on companies that more trade in a range. For instance, gold tends to meander up and down – I have thought about it, but never got around to selling puts on gold companies at lows, and calls when they are high.

In Summary

I find judicious selling of calls and puts is a fairly tame way to make a little extra income on stocks. Also, it forces me to set some price targets for buying and selling. I have horrible selling discipline otherwise – I have a hard time making up my mind to buy a stock, but once I do, and once it goes up, I fall in love with it and don’t want to sell it (partly because lazy me doesn’t want to do the work to find a substitute). Selling calls is one way to force myself to set “OK” price targets for letting a stock go.

All that said, selling calls does forfeit participation in the full upside of a stock, and is probably not a good approach in general for growth-oriented tech stocks. Likewise, selling puts, instead of outright buying a stock, may lead to regrets if the stock price goes way up and gets away from you.

As usual, this discussion does not constitute advice to buy or sell any security.

The Unified Theory of Excel

mdmakowskyLeave a comment

There are two ways to increase profits or available funds: grow revenues or reduce costs. We typically laud the creative teams that identify paths to greater revenues while, at best, tolerating those in charge of tightening belts. Given the tones in which we speak of austerity, there’s the thought that perhaps those at it’s vanguard are underrated (and they probably are, at least relatively). On the other hand, we often find ourselves operating within an economy of credit and blame. Credit for revenue gains tends to spread to the whole team, while credit for profits attributable to spending cuts specifically accrue to the management imposing those cuts. In such a model, spending cuts would be overemphasized as a profit-maximizing strategy. Growth can also be overemphasized of course – venture capital has come to exist as an institution that seems to only be interested in “home run” investment outcomes, likely at the expense of simply supernormal returns. We could keep pursuing this line of thinking, but I’m not really interested in adjudicating where austerity or growth is overrated. I think there is a broader concern to be considered in the growth/austerity strategy dichotomy. Within such a model of optimal decision-making there is an unstated, but critical, assumption that the relevent set of revenues and costs is perfectly fungible, and in turn comparable, across all contexts.

I think of this phenomena as the Unified Theory of Excel (UTE), an operating principle that can take over decision-making within a company or institution. The UTE carries the false promise that all contexts across an operating entity can be reduced to columns in a spreadsheet and, in turn, a decision made by netting out the effect of changes to those columns. Now, If you think that I, your friendly neighborhood economist, am about to make woo-woo claims deriding the information held within costs and revenues, get used to disappointment. My concern lies in the arrogance, sometimes negligence, in the assumption that numerically identical changes in costs and revenues across different contexts are comparable. It’s not that the information within the columns is bogus or irrelevant, but rather that the lack for context characterizing the relationships between the columns undermines any hope for knowledge to be produced. Data are just meaningless numbers absent a model to characterize the relationships between the numbers. And that’s all a model is – an attempt to place the data in the appropriate context.

Complaints from those on ground about clueless management and soulless beancounters are, essentially, complaints that they are operating without a model. Cutting $100k from a marketing budget is not the same thing as cutting $100k on jet engine inspections and quality control. The world of possible outcomes from marketing cuts might include between $25k to $50k less in sales revenue, a large drop the worst attributable failure possible. In contrast, $100k quality control cuts will result in $100k in increased profits in 99% of possible outcomes, but of course there’s also a 1% chance that 10,000 people die in a fiery blaze, billions are lost in lawsuits, and the company ceases to exist. To be clear, I am fully aware of the resources that companies invest in projecting risk from decisions. Rather, the point is to illustrate the importance of context and the dangers of treating all numbers on a ledger as comparable and complete.

The Unified Theory of Excel is the belief that everything is fungible and can be abstracted to a spreadsheet absent any context or model. This belief in universal business fungibility is especially alluring given that the most recent wave of “people who got rich off of low-hanging fruit” were finance folks who observed the fungibility of risk across debt instruments. This false fungibility ignored the dangers of stripping numbers of context, which in the case of mortgage debt instruments included the relationship of ledgers across markets and higher statistical moments i.e. tail risk. Economic theory is built on abstraction, but abstraction has the fun property of being useful until it is disastrous. It’s the last step that kills you. Or creates a financial crisis. Or produces a jet where those 1% events keep happening.

What I am observing, in the news and broader conversation, is a frustration with management that I think is often being misinterpreted as “frustration with business” but I think is more correctly viewed as “frustration with business done poorly” or, perhaps more precisely, “business done with the wrong model”. Writers, actors, and film crews are frustrated with management operating with models that have been outdated for at least a decade. Journalists are losing their minds dealing with publishers who can’t keep outlets afloat and make payroll on time because an underlying model appears to be absent entirely. If this was purely about competing interests then the answer would, in theory, be available in competitive markets or at the collective bargaining table. But something seems off. It I didn’t know better, I’d be looking for a broad inefficiency, some sort of negative technology shock. An investment or commitment to operating in a contextual vacuum.

The thing about MBAs is they are generalists by training who often, by dint of their advanced credentialing, sometimes think of themselves as specialists. Their speciality being “business” carries with it an implied concept that business can be reduced to the universal application of their training and expertise, both of which have increasingly come to be…well…Excel. Excel is many things, but it is not a model (or at least not a very good one). Neither is “business”, for that matter. A spreadsheet supporting a pivot table embedded in a power point slide deck is something that you can carry from job to job, contract to contract. A 73kb hammer you carry in a world of nails waiting to be enumerated on your LinkedIn. It can accomplish tasks, present outcomes, but it offers no more context than a three-ring binder. It’s a model that says that everything is the same, everything is fungible. That the world can be reduced to mathematics no more complicated than 4th grade arithmetic. The sort of simple answer to a complex problem that HL Mencken warned us of.

One of my grad school classmates had a turn of phrase that I’ve grown to appreciate: “Hippy Hayekians”. These were folks who favored free markets not because business people were geniuses or heros, or because goverment was inherently evil, but because good decision-making comes down to the tacit knowledge that only comes from being in and of something, on the ground, embedded in it day to day. I’m by no means an Austrian economist, and my friend would never have put it this way, but I’m increasingly of the view that good management often does in fact come down to “vibes”. If, of course, by “good management” you mean a holistic understanding of the entire enterprise, including not just ledgers, but also risks, ambitions, culture, customers, and constraints. And by “vibes” you mean the tacit knowledge held and communicated by every single human being within a firm. Perhaps the occasional dog or cat.

I’m a data-driven guy down to my bones. Whether its criminal justice policy or how to produce a successful new brand of toothpaste, the best possible answer is in the data. But interpreting data is impossible without context, without a model. So maybe this whole post is a warning to be careful of anyone, be they managers, consultants, or management consultants, offering advice without a model.

Programmer Pain in Memes

Joy BuchananLeave a comment

Memes communicate a lot of information, yet they are rarely preserved and explained.

It is February 2024. A friend of mine who works in tech just posted a fleet of funny memes about his job.

I have written a research paper and a policy paper about job selection into tech.

Research paper: “Willingness to be Paid: Who Trains for Tech Jobs?“

I found that enjoyment or subjective preferences are underrated in the policy literature on the skills gap and promoting STEM in America. In a presentation in the Spring of ’23, I speculated that ChatGPT or other AI-assisted coding tools would make coding less tedious and therefore more fun.

I observe in this set of memes (posted in February 2024) that ChatGPT is already embedded in coding life, and yet it does not feel like anything fundamental has changed. Workers still Google their own way to solutions (although surely that has diminished somewhat due to LLMs). The work still feels hard and the workers still feel undervalued.

Senior programmers today would have grown up working very closely with search engines, largely to harvest the vast knowledge contained in tech message boards. I myself use that tool often when I have to program. Part of learning to code is just learning how to get help. This requires a certain mindset that is different from what is traditionally taught in school.
Many such cases.
Many people who end up as programmers want to do better. They are driven to write clean sensible code. A common theme is frustration that the product does not match the vision. This sentiment comes up more frequently than I have seen in other professions. The work they do is truly hard, and they are rarely afforded enough time to do it “right.”
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Covid Death Structural Breaks

Zachary BartschLeave a comment

xtbreak (STATA)

I found a new time series and panel data tool that I want to share. What does it do? It’s called xtbreak and it finds what are known as ‘structural breaks’ in the data. What does that mean? It means that the determinants of a dependent variable matter differently at different periods of time. In statistics we’d say that the regression coefficients are different during different periods of time. To elaborate, I’ll walk through the same example that the authors of the command use.

You can download the time series data from here: https://github.com/JanDitzen/xtbreak/blob/main/data/US.dta

The data contains weekly US covid cases and deaths for 2020-2021. Here’s what it looks like:

So, what’s the data generating process? It stands to reason that the number of deaths is related to the number of cases one week prior. So, we can adopt the following model:

That seems reasonable. However, we suspect that δ is not the same across the entire sample period. Why not? Medical professionals learned how to better treat covid, and the public changed their behavior so that different types of people contracted covid. Further, once they contracted it, the public’s criteria for visiting the doctor changed. So, while the lagged number of cases is a reasonable determinant of deaths across the entire sample, we would expect it to predict a different number deaths at different times. In the model above, we are saying that δ changes over time and maybe at discrete points.

First, xtbreak allows us to test whether there are any structural breaks. Specifically, it can test whether there are S breaks rather than S-1 breaks. If the test statistic is greater than the critical statistics, then we can conclude that there are some number of breaks. Note that there being 5 breaks given that there are 4 depends on there also be at least 4 breaks. And since we can’t say that there are certainly 4 breaks rather than 3, it would be inappropriate to say that there are 4 or 5 breaks.

Great, so if there are three structural breaks, then when do they occur? xbtreak can answer that too (below). The three structural breaks are noted as the 20th  week of 2020, the 51st week of 2020, and the 11th week of 2021. Conveniently, there is also a confidence interval. Note that the confidence intervals for 2020w11 and 2021w11 breaks are nice and precise with a 1-week confidence interval. The 2nd break, however, has a big 30-week confidence interval (nearly 7 months). So, while we suspect that there is a 3rd  structural break, we don’t know as precisely where it is.

Regardless, if there are three structural breaks, then that means that there are four time periods with different relationships between lagged covid cases and covid deaths. We can create a scatter plot of the raw data and run a regression to see the different slopes. Below we can see the different slopes that describe the impact of lagged covid cases on deaths. Sensibly, covid cases resulted in more deaths earlier during the pandemic. As time passed, the proportion of cases which resulted in death declined (as seen in the falling slope of the dots). It’s no wonder that people were freaking out at the start of the pandemic.

What’s nice about this method for finding breaks is that it is statistically determined. Of course, it’s important to have a theoretical motivation for why any breaks would occur in the first place. This method is more rigorous than eye-balling the data and provides opportunities to hypothesis test the number of breaks and their location. If you read the documentation, then there are other tests, such as breaks in the constant, that are also possible.

See this ppt by the authors for more: https://www.stata.com/meeting/germany21/slides/Germany21_Ditzen.pdf

See this Stata Journal article for more still: https://repec.cal.bham.ac.uk/pdf/21-14.pdf