Episode #224: The Best Books We Read in 2018

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“I think we ought to read only the kind of books that wound and stab us. If the book we are reading doesn’t wake us up with a blow on the head, what are we reading it for.” -Franz Kafka

Ron’s Five Best Books in 2018

5. The Tyranny of Metrics, Jerry Muller

“Juking the stats”—the way in which institutions are perverted, as effort is diverted from its true purpose to meeting the metric targets.

Surgeon avoids tough cases—creaming, avoiding risky instances that might have negative effect impact on metrics.

“While we are bound to live in an age of measurement, we live in an age of mismeasurement, over-measurement, misleading measurement, and counter-productive measurement. The problem is not measurement, but excessive measurement and inappropriate measurement—not metrics, but metric fixation.”

Hospitals penalized % patients fail survive for thirty days beyond surgery, so they kept the patient alive for 31 days.

The Tyranny of Metrics
By Jerry Z. Muller

Metric fixation leads to a diversion of resources away from frontline producers toward managers, admin, and those who gather and manipulate data. Goodhart’s law: Any measure used for control is unreliable.

Metric fixation stifles innovation, risk-taking, and creativity, and creates a short-term vs. long-term outlook. During Vietnam War, Robert McNamara substituted civilian mathematical analysis for military expertise.

In the book, Muller covers:

  • Colleges and Universities

    • Training, oriented to production and survival

    • Education, oriented to making survival meaningful

  • Schools

  • Medicine—diagnosing and treating disease, American medicine is best in world; lifestyle patters beyond control of Drs

  • Policing

  • The Military

  • Business & Finance

  • Philanthropy and Foreign Aid—the snake of accountability eats its own tail

Sunlight best disinfectant, Wikileakism. More often, result is paralysis. Transparency becomes the enemy of performance

You can listen to Jerry Muller being interviewed by Russ Roberts on EconTalk

4. Strategic Cost Transformation, Dr. Reginald Lee

Ron was honored to write the Foreword, where he states:

“Dr. Lee’s distinction between noncash costs and cash costs is brilliant, not to mention essential for understanding how manipulating costs will not alter cash. The goal is to generate cash profit, not accounting profit. Most costs in organizations today are for capacity: Human capital, facilities, and technology. These costs don’t change based on how they are utilized, and yet cost accountants force math relationships that make it appear as if they did, such as cost per hour. The fact is, services and products don’t have costs, organizations do.

Besides, as Dr. Lee makes clear, “You don’t need calculated costs for managerial purposes. The data in the OC domain are precise and unambiguous [measurements]. The AD information is ambiguous and messy [metrics]. OC provides everything AD does without the drama.”

Cost accountants have all sorts of metrics in their toolboxes they claim are the magic bullet for calculating profitability per job, or per product/service. Yet these metrics of margin analysis won’t predict the need for additional capacity, or help you model cash flow, nor do they tell you from a pricing perspective if you’ve left money on the table.

Further, these metrics do not help you improve the future performance of your organization. Cost accountants are collectively plunging a ruler into the oven to determine its temperature—it is the wrong tool.

Listen to our interviews with Dr. Lee: Episode #200 and Episode #112.

3. Factfulness, Hans Rosling

Son, Ola, daughter-in-law, Anna, also co-authored the book.

Hans Rosling, R.I.P. [July 27, 1948 – Feb 7, 2017]

The book begins with a test, here are few of the questions, with the correct answer in bold.

Where does the majority of the world population live? Low income countries (9%)/middle (75%)/high income countries

In last 20 years, proportion of world population living in extreme poverty has… Almost doubled/same/almost halved

On average, 7% get it right (less than 1 in 10), all around the world, all types of professions, including Nobel Prize winners, and medical researchers worst

They did worse than random chance!

Chimps would do better—and their errors would be equally shared between the two wrong answers. The human errors all tended to be in one direction—the world is worse than it really is.

Rosling calls this an “Overdramatic worldview,” and it’s not the media’s, or the school’s fault, etc.

It’s how our brains work: illusions don’t happen in our eyes, they happen in our brains.

One linguistic change he convinced me of: there is no gap between the “developed” and “developing” worlds.

2. In the First Circle, Aleksandr Solzhenitsyn

Shunning the moral relativism that permeates modern thought, Solzhenitsyn unapologetically treats good and evil and the human soul as metaphysical realities.

Four days in a sharashka (slang for a prison research institute), December 24-27, 1949

Polyphonic principle: no single character dominates the novel.

To sum the book up: What does it mean to be a human being?

Solzhenitsyn last words to his fellow countrymen as he departed into exile: “Live Not by Lies!”

“The man from whom you’ve taken everything is no longer in your power; he is free again.”

“Lenin and Trotsky were right: If you couldn’t shoot people without trial, you would never be able to make history at all.”

“Socialism without Stalin was no different from fascism!” (Stalin to himself)

Mrs. Elanor Roosevelt: ask the prisoners whether any of them wished to address a complaint to the UN?

“They unanimously protest against the distressing situation of the blacks in America and ask the UN to look into the matter.”

There are two episodes on EconTalk on this book, with Russian Literature Professor Kevin McKenna. The first one talks about Solzhenitsyn the man, and the second discusses the book [spoiler alert for the second interview]. 

Ed’s Five Best Books in 2018

5. The Vampire Economy, Gunter Reimann

4. Tomorrow 3.0: Transaction Costs and the Sharing Economy, Michael C. Munger

Listen to our show with Mike Munger, Episode #190.

2. Win Bigly, Scott Adams

And… Ron and Ed’s #1 Book for 2018 surprising no one…

1. Life After Google, George Gilder

  • Kurt Godel: “Every logical system necessarily depends on propositions that cannot be proved within the system.” The mathematics of information, led to computers.

  • Computers required what Alan Turing called “oracles” to give them instructions and judge their outputs. Also led to Claude Shannon’s information theory.

  • Gordon Bell coined Bell’s Law: every decade a hundredfold drop in the price of processing power engenders a new computer architecture.

Listen to our interview with George Gilder on Life After Google, Episode #207.

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Ed Kless

Ed Kless joined Sage in July of 2003 and is currently the senior director of partner development and strategy. He develops and delivers curriculum for Sage business partners on the art and practice of small business consulting. Courses include: Sage Consulting Academy, Business Strategy and Customer Experience Workshops. Ed is the author of The Soul of Enterprise: Dialogues on Business in the Knowledge Economy, a compendium of a few of the episodes of his VoiceAmerica talk-show The Soul of Enterprise: Business in the Knowledge Economy with Ron Baker, founder of the VeraSage Institute where Ed is also a senior fellow.