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25 Aug 15:06

Schedule for Week of August 26, 2018

by Bill McBride
The key report this week is the second estimate of Q2 GDP.

Other key indicators include Personal Income and Outlays for July and Case-Shiller house prices for June.

For manufacturing, the Dallas and Richmond Fed manufacturing surveys will be released this week.

----- Monday, Aug 27th -----
8:30 AM ET: Chicago Fed National Activity Index for July. This is a composite index of other data.

10:30 AM: Dallas Fed Survey of Manufacturing Activity for August.

----- Tuesday, Aug 28th -----
Case-Shiller House Prices Indices9:00 AM ET: S&P/Case-Shiller House Price Index for June.

This graph shows the nominal seasonally adjusted National Index, Composite 10 and Composite 20 indexes through the most recent report (the Composite 20 was started in January 2000).

The consensus is for a 6.5% year-over-year increase in the Comp 20 index for June.

10:00 AM ET: Richmond Fed Survey of Manufacturing Activity for August. This is the last of the regional surveys for August.

----- Wednesday, Aug 29th -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:30 AM: Gross Domestic Product, 2nd quarter 2018 (Second estimate). The consensus is that real GDP increased 4.0% annualized in Q2, down from the advance estimate of 4.1%.

10:00 AM: Pending Home Sales Index for July. The consensus is for no change in the index.

----- Thursday, Aug 30th -----
8:30 AM: The initial weekly unemployment claims report will be released.  The consensus is for 214 thousand initial claims, up from 210 thousand the previous week.

8:30 AM: Personal Income and Outlays for July. The consensus is for a 0.4% increase in personal income, and for a 0.4% increase in personal spending. And for the Core PCE price index to increase 0.2%.

----- Friday, Aug 31st -----
9:45 AM: Chicago Purchasing Managers Index for August. The consensus is for a reading of 63.5, down from 65.5 in July.

10:00 AM: University of Michigan's Consumer sentiment index (Final for August). The consensus is for a reading of 95.3.
09 Apr 05:46

“That ‘writers write’ is meant to be self-evident. People...



“That ‘writers write’ is meant to be self-evident. People like to say it. I find it is hardly ever true. Writers drink. Writers rant. Writers phone. Writers sleep. I have met very few writers who write at all.”
—Renata Adler, Speedboat

09 Apr 05:43

“The things we admire in men, kindness and generosity,...



“The things we admire in men, kindness and generosity, openness, honesty, understanding and feeling, are the concomitants of failure in our system. And those traits we detest, sharpness, greed, acquisitiveness, meanness, egotism and self-interest, are the traits of success. And while men admire the quality of the first they love the produce of the second.”
― John Steinbeck, Cannery Row

09 Apr 05:43

Management/Success/Leadership: Mostly Bullshit

Sometimes I think the field of management/success/leadership is nothing more than a confusion of correlation for causation. For example, I blogged recently that "passion" isn't so much a cause of success as a result of success, and it grows as the success grows. Success can make anyone passionate about what they are doing. When the experts say we need passion to be successful, that's mostly bullshit. What you need is energy, talent, hard work, a reasonable plan, and lots of luck.

Company culture is another area that I think the experts get backwards. The common belief is that you need a good company culture to create success. But isn't it more likely that companies with awesome employees get both a good culture and success at the same time? A good corporate culture is a byproduct of doing everything right; it's not the cause of success as much as the outcome. Success improves culture more than a good culture can cause success.

And how about that charisma thing? That's important, right? Everyone says so. Look at Richard Branson, Steve Jobs, and Larry Ellison. Those guys have plenty of charisma so it must be important to success, we assume. But let me tell you what causes charisma: success.

I'm in a unique position to judge the success=charisma hypothesis because I slip in and out of famousness all day long. Cartoonists aren't normally recognized, and when I walk into a room as a "normal" I exhibit no charisma whatsoever. I might even be absorbing some charisma that is already in the atmosphere. But when I enter a room at an event where people are expecting me in my capacity as a semi-famous cartoonist, suddenly I appear to have some charisma. I feel like Moses in a room full of water. Trust me when I say that if Steve Jobs had not been successful so young, he'd be known as the lying asshole who needs a shower, not the guy with the reality distortion field. Charisma is bullshit.

Today I was reading an expert's opinion that companies get better results when managers learn to avoid micromanaging employees. But how do we know those non-micromanaging managers get better results? Wouldn't it also be true that wherever you have the most highly capable employees - the ones most likely to create success - you have a boss who knows he can back off the micromanaging? One would expect more micromanaging in companies with untalented employees. So how do you know what causes what?

Consider the thousands of different books on management/success/leadership. If any of this were real science, all managers would learn the same half-dozen secrets to success and go on to great things. The reality of the business world is more like infinite monkeys with typewriters. Sooner or later a monkey with an ass pimple will type something that makes sense and every management expert in the world will attribute the success to the ass pimple.

How about the idea that every hourly wage slave should "act like an entrepreneur"?  How do you think that would play out with Apple's 50,000 employees? The unsexy reality is that everyone in the company can't be creative risk-takers. Someone has to actually work. My guess is that Apple would fall apart if more than 5% of its employees acted like entrepreneurs. And maybe the tipping point is only 2%. Entrepreneurs are disruptive, rule-breaking risk-takers. A little bit of that goes a long way.

I first noticed the questionable claims of management experts back in the nineties, when it was fashionable to explain a company's success by its generous employee benefits. The quaint idea of the time was that treating employees like kings and queens would free their creative energies to create massive profits. The boring reality is that companies that are successful have the resources to be generous to employees and so they do. The best way a CEO can justify an obscene pay package is by treating employees generously. To put this in another way, have you ever seen a corporate turnaround that was caused primarily by improving employee benefits?

The fields of management/success/leadership are a lot like the finance industry in the sense that much of it is based on confusing correlation and chance with causation. We humans like to feel as if we understand and control our environments. We don't like to think of ourselves as helpless leaves blowing in the wind of chance. So we clutch at any ridiculous explanation of how things work.

My view is that success happens when you have a coincidence of talent, resources, and timing. One can explain the existence of successful serial entrepreneurs by the fact that once successful they gain resources, credibility, extra talent, contacts, and the opportunity to live someplace such as Silicon Valley where opportunities fall out of trees.  You would expect that group of people to get lucky more often than someone just starting out.

Dilbert came to fame in the nineties when the working world was experiencing an unprecedented "bubble" of management bullshit. Every time a new business book became a best seller, middle managers across the globe scurried to buy a copy and started spewing its jargon. Eventually the sale of business books dropped off when, I assume, people realized there couldn't really be 10,000 different sure-fire formulas for success.

But lately I've been feeling another bullshit bubble forming in the world. And I don't mean only the financial markets, which are sketchy for lots of reasons. It's just a feeling, but it seems to me that the management/success/leadership bullshit bubble is once again reaching full inflation.

Are you feeling the bubble too, or is it just me?

09 Apr 05:42

The Monty Hall Problem and Schrodinger's Cat

The famous Monty Hall problem in the field of statistics goes like this: Monty Hall is a game show host. You are given a choice of three doors. One has a car behind it, the other two have goats. If you pick the door with the car, you win it. Your odds are 1-in-3.

So you pick a door, but before it opens, Monty opens one of the other two doors to reveal a goat. He asks if you want to switch from the door you initially picked to the other closed door. Your brain says the odds are the same for any closed door, so you stay. But in fact, the odds are twice as good if you switch doors.

You can see the math of it here. But if you are normal, you'll never reconcile in your mind how one closed door could have better odds than the other. If there are two closed doors remaining, how can the odds be anything but 50-50?

This reminds me of the Schrodinger's Cat thought experiment in which a cat in a sealed box (presumably with air holes) exists in a state of being simultaneously alive and dead depending on the results of a randomized event happening inside the box. How can a cat be alive and dead at the same time? Math says it can happen, my brain says no.

The pattern recognition part of my brain is connecting the Monty Hall problem with the Shrodinger's Cat thought experiment because both situations feel like proof that our brains are not equipped to understand reality at its most basic level.

Most of us accept the idea that math is a better indicator of truth than our buggy personal perceptions. Math doesn't lie, but our brains are huge scam artists. The Monty Hall problem and Schrodinger's Cat are examples in which our perceptions of reality and the math of reality disagree in a big way. It makes me wonder how much of the rest of my so-called reality disagrees with math without me knowing.

If I were programming a computer simulation full of artificial humans who believe they are real, I would need to take some shortcuts in creating their context and history. It would be nearly impossible to invent consistent histories for seven billion people spanning back to the primordial ooze. A far smarter approach would be to craft the history as you go, based on the present, in whatever minimum way is necessary to make all histories consistent.

For example, let's say you learn that you are the grand winner of a lottery. At the moment you realize you are the big winner, history becomes limited to only the possibilities that got you to that winning moment. Before you learned you were a winner, the reality at the lottery headquarters was only a smear of possibilities - like Shrodinger's Cat - where you were both a winner and a loser, just like everyone else. As soon as you learn you won, your history and everyone else's harden to conform to it. No one else can perceive that they won the grand prize in that particular lottery.

If I were the programmer of this simulation that you call your reality, I would make the history dependent on the present just to streamline my work. All I need from my fake history is that it is consistent with all the other fake histories so there is no "tell" left by the programmer.

I realize the simpler explanation for my confusion about Monty Hall and Schrodinger's cat is "Math be hard." But I like the psychological freedom of feeling as though I am the author of my own history and not its bitch.

Here's the cool part: I get to keep my interpretation of reality - in which my history is a manufactured illusion - until something in my present experience is inconsistent with that view.

Recently I heard of two senior citizens with mild dementia who became friendly at a senior care facility. Their fragile minds concocted an elaborate history of being childhood acquaintances that had found each other through fate. No one tries to dissuade them of this illusion because it works for them. They successfully rewrote their histories without any repercussions.

I wonder how often the rest of us rewrite our histories. Our only limitations are that our new histories have to be consistent with whatever scraps of history have already hardened.