Yearly Archives: 2007

Citizen Assemblies: Overstating the wisdom of crowds

On numerous occasions over the past few months I’ve heard people refer to Surowiecki’s “The Wisdom of Crowds” when explaining why any group driven project is inherently good.

My favourite has been the explanation regarding how citizen’s assemblies – because they tend to be composed of 100 or more members – are inherently wise and therefor produce a good outcome. To begin with, I find it interesting that those who defend electoral reform rarely talk about the merits of the proposal and instead refer to the soundness of the decision making process used to reach them. Citizen assemblies, it must be said, are not some magical process that produce inherently good outcomes. Indeed, if those who invoke his book had actually read it, they’d realize the Surowiecki’s analysis not only fails to support their contention about the process, it may actually do the opposite.

Pause for a second, and think about the logic that says a solution is good simply because it was arrived at by a large group of people. It is actually quite frightening. Indeed, one of the first things Surowiecki points out is that not all crowds are wise. The statement hardly needs supporting, but Surowiecki nonetheless trots out numerous examples of unwise crowds – angry mobs, investors in a stock bubble, and the various branches of US intelligence services. It’s not simply the size of a crowd that makes it “wise” it is also the rules that guide its behaviour. To be specific Surowiecki cites four key elements (which I’ve cribbed from wikipedia):

Diversity of opinion: Crowds – even those whose members hold ill-informed or eccentric interpretation of the known facts – will be wiser then groups that possess identical data, similar perspectives, or interpret data in a similar fashion.

Independence: Crowd members opinions aren’t determined by the opinions of those around them.

Decentralization: People are able to specialize and draw on local knowledge.

Aggregation: A mechanism for turning private judgments into a collective decisions.

Violate one of these elements and your crowd risks becoming a mob. By my estimation, citizen assemblies run the risk of violating three.

First, the diversity of opinion is at risk. While citizen assemblies’ proponents would have you believe they are composed randomly, this is in fact, not the case. Firstly, there are a number of people who, for reasons of work or family, would not participate. But what really interests me is that people opposed to change (and possibly those who are simply indifferent) are less likely to participate. If you thought a proposition (such as electoral reform) was silly, would you spend a year debating it – or would you simply await your opportunity to vote against it at the end of the process? Participation in these assemblies is almost assuredly tilted toward those predisposed to favour change – e.g. the crowd is more likely to be homogeneous in its desire for change and its perception of the electoral system.

Second, citizen assemblies are less likely to be independent. If you enter into a process to change the voting system the pressure to support change, any change, must be intense. Imagine if you sat around for a year listening, debating and arguing, and came out of the process agreeing that the status quo was ultimately superior to any other option. What a frustrating outcome! Tax payers would question why the money was spent and your friends would ridicule you for “wasting your time.” Worst still, what if the assembly couldn’t agree? What would that say about its constituent members? The internally created pressure on assembly members to put forward something, anything(!) new, and to have a clear majority of assembly members support this proposal was likely intense. I’d wager that once momentum for one solution began to emerge, other members were willing to bandwagon along “for the sake of the process.” In short, assembly members allowed their opinions to be determined by the opinions of those around them. (except, of course for those who held out. The same people who – from first hand accounts – were invariable referred to as stick in the muds and ‘difficult’ people. “Think like the rest of us or we’ll socially ostracize you…” isn’t that a sign of a mob?)

Finally, citizen assemblies have poor mechanisms for aggregation. Although neither the BC nor the Ontario Citizen assemblies required it, both placed strong emphasis on reaching consensus – articulating it as an ideal. If there is one system of decision-making Surowiecki believes makes a crowd dumb, it is a consensus-based approach. In order to reach consensus crowd members sacrifice the previous three elements – diversity, independence and decentralization – in order to gravitate towards the group’s mean. In effect the group’s collective knowledge and diversity of analytical ability is lost. This is the antithesis of a wise crowd. It is a crowd that actually gets dumber with time because it has less data, less analysis and fewer perspectives with which to assess the problem. It isn’t that people agree – they simply censor themselves to prevent disagreement.

This isn’t to say the Citizen Assemblies came to a bad solution for electoral reform (although to confess, I think in both BC and Ontario they did) . Again, all I wish to convey is that the citizen assemblies are not some magical process that produce inherently good outcomes. These process are neither democratic, representative, nor inherently superior – so don’t let supporters of the ballot initiatives bully you with process arguments. Let’s assess these proposals based on their contents – and what they do to democracy in Canada (which, in Ontario’s case, strengthens the parties and the backroom boys).

Sam Suillivan: Public Policy or Personal Gain?

Imagine if, while sitting as Foreign Minister, Lloyd Axworthy had decided to not only place the new concept of “Human Security” at the heart of the Ministry’s agenda but had also decided to trade mark the term – under his personal name.

Clearly the opposition members would have a field day… highlighting how the Minister was using his office for personal gain – using his political influence to create a brand that ultimately he owned the rights to.

Sadly, this hypothetical example is all too real here in my home town of Vancouver. Our Mayor, Sam Sullivan, has personally trade-marked “ecodensity” a term he’s been using to describe the municipal government’s a new initiative to reducie Vancouver’s environmental impact by creating a more compact city. As a few legal experts have noted, this is something that would normally be trademarked by the city’s lawyers… oddly it wasn’t. If that wasn’t enough it was again the mayor, and not the city or its staff, that registered the domain name ecodensity.ca.

None of the Mayor’s gaffe’s – like taking 30 item long priority list to a meeting with the Prime Minister (you should take a list of 3 items and you’ll probably get to talk about one) and then refusing to share anything about the discussion with taxpayers (who footed the bill) – have been so heavy so as to cost him an election, cumulatively however this errors will start to take their toll.

Fortunately for the Mayor, no one is really paying attention to municipal politics in Vancouver.

Keeping the internet free

For those worried (or not yet worried, but who should be) about maintaining the internet as a open platform upon which anyone can participate and attract an audience, please let me point you to David Weinberger’s most recent ramblings on the subject.

He makes a strong case for why companies that provide us with internet access may have to be regulated.

I recently discovered Weinberger while listening to am interview on his newest book “Everything is Miscellaneously.” Great stuff. Vancouver Public Library has been kind enough to hook me up with his other books as well… (these libraries, they are amazing! Did you know you can read a book without buying it? Crazy.)

He also maintains a blog, for those who are curious.

cut and run from cut and run

So it turns out that if you use Bush-like rhetoric people start to believe that you also share in his goals, aims and methods. And, given the president’s popularity is somewhere in the 20’s or 30’s in America, he’s almost certainly the most unpopular person in the world for Canadians.

Little wonder that Canadian support for the Afghan conflict has waned.

This is a serious problem, because contrary to what the NDP would have you believe, this is an important mission, one that benefits from the skills and experience a country like Canada brings to the table. Changing the rhetoric will be a good start, but the real question remains, are we prepared to tell the Americans how the mission should be run? Will we imprint a Canadian approach on the mission?

Anatomy of a Positional Negotiation (redux)

Back in March I wrote this post about the breakdown in negotiations between Ryan Smyth (a hockey star) and the Edmonton Oilers. Because things fell apart despite the fact that Smyth, the Oilers and their fans all wanted an agreement, this negotiation remains my favourite example about how process, and not substance, can torpedo agreements and destroy relationships. Indeed, the case is so good, it has become a key teaching tool in my negotiation workshops (when in Canada, of course…).

Interestingly, recent events have added to the important negotiation lessons that can be drawn.

When sharing the case some people contended that Smyth and the Oilers didn’t fall out but instead cut a secret deal, one that would bring Ryan back to Edmonton once he became a free-agent. The fact that, after being traded, Ryan stood crying in the Edmonton Airport while awaiting his flight to New York didn’t dissuade these doubters. This was of course, all part of the act.

Well, on July 2nd, on the first day of free-agency, Ryan Smyth signed a contract with the Colorado Avalanch for $31.25 million. A bad outcome for Oilers fans, but a good outcome for my credibility as a negotiation consultant.

So why didn’t Smyth go back to Edmonton?

I can think of two reasons – both of which spring from the positional negotiation process Smyth and the Oilers adopted.

Firstly, the previous negotiations permanently damaged relations between Smyth and the Oilers. A haggling process never builds a stronger relationship. It generally involves the parties slugging it out as they tell one another why the other’s current offer is insulting. Of course none of it’s “personal.” But isn’t it is telling that the Oilers broke off negotiations and traded Smyth without notifying him (I believe he learnt he’d been traded by watching TV). Moreover, as I mentioned before, Smyth was distraught enough to cry during the interview in the airport. You don’t have to be a negotiation consultant to know that when one person makes another cry, the agrieved party is looking for ways to work with them again. In this case, Smyth probably wasn’t receptive to any new offers from the Oilers. Their prior negotiation burnt that bridge.

Second, the Oilers painted themselves into a corner on the issue of price. I’ve maintained that Smyth probably wanted to be in Edmonton or Calgary. In the above linked to YouTube video Smyth says his heart is in Edmonton, and he probably wants to be close to family, community, charitable work, etc… I suspect he might have accepted a marginally reduced salary in order to stay there. But with other teams now offering over $31 million, the Oilers probably needed to offer $29-30 million in order to compete. Given their previous “best” offer had been $27 million, any new higher offer would be an admission that they’d undervalued Smyth. That left them with two options. Option 1: Eat humble pie, offer $30 million and admit they’d been lowballing Smyth. In the testosterone world of hockey I suspect the Oilers GM’s ego couldn’t stomach that choice… Not that it would have mattered, any such an offer would have been tainted. It would be like saying “sorry we tried to screw you in our previous negotiations, but we hope that you’ll come work for us now that we’ve been forced to offer you more.” That left option 2: Save face by walking away and claiming the Avalanch over-paid.

Of course, the Oilers’ GM may genuinely believe that Smyth isn’t worth $30 million. Who knows, he may be right. Only time will tell. But, the negotiation process he adopted – and not the substance – destroyed an opportunity for getting Smyth at a much lower price. Most people believe negotiations succeed or fail based on substance (can buyers and sellers agree on a price), sadly that is only sometimes the case. All too often, the determining factor is how we conduct negotiations.

Job Posting @ Mars

This job opportunity came through from Ross W., a very cool looking job indeed. I know the MaRS team is excited about this new development. Contact info is at the bottom. Enjoy!

Director, Social Entrepreneurship

The MaRS Discovery District is seeking a Director, Social Entrepreneurship. Reporting to the CEO, the Director will assemble and lead a team of advisors focused on helping new and emerging social entrepreneurs refine, launch and scale their innovative ideas for creating transformative social change.

S/he will also lead Social Innovation Generation @ MaRS (SiG@MaRS) – a node in a new national network linking MaRS, the McConnell Foundation, the University of Waterloo and PLAN. Finally, the successful candidate will become a member of MaRS’ senior leadership team and contribute to the development and evolution of MaRS itself.

Position Overview

The person hired for this position will leverage MaRS’ expertise and networks in supporting emerging entrepreneurs to develop a new suite of programs and services focused on social entrepreneurship.

Responsibilities will include:

  • Liaising with the other SiG nodes to develop a national social innovation network, spanning idea generation, incubation, evolution and expansion
  • Building and leading a team with the expertise to help emerging social entrepreneurs test and launch their ideas and strengthen and grow their organizations
  • Selecting and coordinating a group of external mentors and advisors to work with emerging social ventures and their leadership teams
  • Developing course material/curricula/programming content, and assembling tools and templates that support social innovation
  • Creating opportunities to connect social innovators and their commercial counterparts
  • Build strategic initiatives in financing social ventures, knowledge transfer, and enabling technology platforms for social change
  • Identifying the key organizations active in this field across the country – and internationally – and developing a partnership strategy that includes government and the private sector
  • As a young, entrepreneurial organization, everyone at MaRS is expected to be flexible; specific duties/responsibilities will evolve, and staff will be expected to contribute to various projects as needed.

Skills/Qualifications

  • At least 5 years of experience in the social sector, including roles that involved team formation and leadership
  • Entrepreneurial experience either creating or building an early-stage venture
  • Knowledge of public policy and a proven ability to work with public, private and third sector partners
  • Ability to work both independently and in teams
  • Exceptional communications skills, both oral and written

About MaRS

MaRS is a not-for-profit organization dedicated to maximizing the economic and social mpact of Canadian innovation. The MaRS Centre – a 700,000 sf convergence centre in downtown Toronto houses over 65 organizations, from investors and scientists to entrepreneurs and policymakers.

Contact Information

Ross Wallace – Director, Corporate Strategy (416) 673-8126 – rwallace@marsdd.com
Applications for this position must be received by July 31, 2007.

Sicko – I laughed, I cried, but I didn't think

I saw Sicko on Sunday night. No doubt, Michael Moore makes a fun movie. Clearly the US health insurance system is broken. It is, in all honesty, an embarrassment – a fact Moore ruthlessly exploits to great effect. That said, I nonetheless left the theater vaguely unsatisfied. I think it is because there is virtually no analysis of why the US healthcare system is broken, beyond of course the old stand by of “corporations are evil.”

As the film repeatedly demonstrates, health insurance firms often behave appallingly. But it isn’t because they are staffed entirely by evil people. This is a structural problem. For some reason, these firms are incented to literally turn their clients into their enemies (which is never a sound business strategy).

The best explanation I’ve seen comes from 5 pages in The Undercover Economist (an excellent book) where the author – Tim Harford – talks about the problems created in markets where there are asymmetries in knowledge. It is so good, I’ve reprinted (in an edited and very condensed form) the relevant bits:

“Economists have known for a while that when one participant in a transaction has inside information, markets may not work. It makes intuitive sense. But it wasn’t until an economist named George Akerlof published a revolutionary paper in 1970 that economists realized quite how profound the problem might be.

Using the used car market as an example, Akerlof showed that even if the market is highly competitive, it simply cannot work if sellers know the quality of their cars and buyers do not. For example, let’s say that half the used cars on sale are “peaches,” and half are “lemons.” The peaches are worth more to prospective buyers than to sellers – otherwise the buyers wouldn’t be buyers – say, $5,000 to prospective buyers and $4000 to sellers. The lemons are worthless pieces of junk. Sellers know if the car they’re selling is a lemon or peach. Buyers have to guess.

A buyer who doesn’t mind taking a fair gamble might think that anything between $2000 and $2500 would be a reasonable price for a car that has a 50/50 chance of being a peach. The seller of course don’t have to gamble: they know for certain whether their car is a peach or lemon. The problem is that sellers with lemons would snatch up a $2500 offer while sellers with peaches would find it insulting. Wander around offering $2500 for a car and you’ll discover that only lemons are for sale at that price. Of course, if you offered $4001 you would also see the peaches on the market – but the lemons won’t go away, and $4001 is not an attractive price for a car that only has a 50% chance of running properly.

This isn’t just about a trivial problem around the fringes of the market. In this scenario there is no market. Sellers won’t sell a peach for less than $4000, but buyers won’t offer that much for a car that has a 50% chance of being a lemon. With buyers only offering $2500 the sellers won’t sell their peaches, so in the end the only cars that get traded are worthless lemons, which get passed around for next nothing. Less extreme assumptions about the problem lead to less extreme breakdowns of the market, but the conclusions are similar.

Now let’s look at health insurance in this lens:

Let’s say that people who are likely prone to sickness are “lemons”; people who are likely to stay healthy are “peaches.” If, I suspect myself to be a lemon, I’d be advised to buy all the medical insurance I can. If, on the other hand, you feel fine and all your ancestors lived to be a hundred, then you may only buy medical insurance if it is cheap. After all, you hardly expect to need it.

Thanks to Akerlof’s proof that markets whose players have asymmetrical information are doomed, we can see how the insurance market may disappear. You, whose body is a succulent peach, will not find a typical insurance package a good deal; while I, whose body is a bitter lemon, will embrace a typical insurance package with open arms. The result is that the insurance company only sells insurance to people who are confident they will use it. As a result, the insurer loses clients who are unlikely to make claims and acquires the clients who are likely to make costly claims. As a result the insurer has to cut back on benefits and raise premiums. People of middling health now find the insurance is too expensive and cancel it, eliminating even more marginal “peaches” from the insurance pool and forcing insurance coming to raise premiums even higher to stay in business. More and more people cancel their policies, and in the end only the most sickly of the lemons will buy insurance at a price that will be nearly impossible to afford.”

Admittedly, this hardly covers all the problems facing the US healthcare system, but it does give an assessment of why the market for health insurance creates firms who behave so poorly (and yes, criminally). It is, in my mind, the best explanation for why a single insurer system (like what we have here in Canada) can work more effectively. However, this a single insurer system also creates problematic incentives, but more on that later in the week… (is anyone left reading a post this long?)

Taylormania sweeps the nation

Anyone who’s picked up the summer edition of The Walrus may have seen Taylor Owen and Patrick Travers piece – entitled 3D Vision – on Canada’s mission in Afghanistan. Interesting that The Walrus allows free access to their articles.

Taylor also interviewed on CKNW Radio on sunday at 2:30pm, you can hear the interview if you go here (creating a user name and password is a hassle, but free).

Also, on a completely different tack, for those that didn’t catch it, this post once again demonstrates why Andrew Potter is such a joy to read.

Foreign Policy in Asia

This story is an interesting update on the growing links between the United States and India.

The integration of India into the broad alliance of Western Democracies will probably be the most important geopolitical challenge and opportunity of the first half of the 21st century.

Conservatives (or for IR geeks, Neorealists) will like it because it will help contain China. Liberals will like it because it will both strengthen a democratic anchor in the heart of Asia and create a powerful ally whose values and ideals are broadly aligned with our own.

India is bankable because it is increasingly capitalistic and democratic, has an independent judiciary, and its demographics are slowly stabilizing. This puts it in sharp relief against China which is increasingly capitalistic and authoritarian, possesses a weak rule of law, and has highly unstable demographics (the one-child policy is causing both a gender imbalance and creating the longer term crisis of a suddenly contracting population). In short, China has the short term potential of being quite powerful, but over the long term, could become a source of instability. India, over the short term runs the risk of being impotent, but over the longer term could become a source of power and stability. Hence, the western economies are happy to trade with China, but the relationship ends there. With India, they not only want to trade but also explore the possibilities of partnership.

So where is Canada in all this?

Unclear. I’ve seen no evidence that we are making ourselves indispensable to the key players in this new alliance. And, as our experience in NATO has taught us, it is always good to get in on the ground floor. Alas, you have to have a reason to get in the door. It’s not clear we have one. And that is very, very, bad news.

Afghanistan – Exploding the mission

The Asia Times Online has reported that the United States and its NATO allies have been granted permission to hunt for the Taliban inside Pakistan.

This is a dramatic change in the mission.

The upside is significant. Extending the use of force into Pakistan denies the Taliban a safe haven from which to prepare and launch attacks in Afghanistan.

The risks however, are equally significant. This is a major escalation of the war. Indeed, it is, in many ways, precisely what Al-Qaeda has always wanted – an expansion of the conflict into a broader war, one that brings to rise the thorny situation of having an (at best) semi-legitimate secular Pakistani government coordinate attacks against its own citizens in conjunction with US forces.

Moreover, the Afghan conflict has always served as an outlet for Pakistani extremists, a method of preventing civil war by focusing their attention abroad. This agreement could bring those chickens home to roost – causing a civil war between secular and fundamentalist Pakistanis – all with American involvement.

If it goes well it will be a major blow against extremism. If it goes poorly, the geopolitical consequences will make Bush’s disastrous adventure in Iraq look like a historical footnote in comparison.

These stakes are big.

(good to see Canadian newspapers have so far ignored this important development)