On Cutting Wages

This post is a response to Bryan Caplan’s request that I share my experiences cutting wages. It was not fun.

While I was CEO of MetaMed, we were continuously short of revenue. We started the company thinking we would be able to sustain ourselves through sales, but those sales did not materialize. In order to survive long enough to give the sales force a chance, we needed to cut pay.

To do this, the business of the company had to be put on hold while we worked out what would be done. I had to take my core employees aside, one by one, and get them on board with the idea. They were all willing to pitch in, provided the others were as well; if any of them had balked, it is likely all of them would have refused. The conversations went about as well as one could hope, but even then, the amount of stress and tension involved was huge.

From that point on, the cut was a constant drain on the company’s morale, but an even bigger one on its time. The question of when full salaries would be restored came up constantly, as people had committed to expenses on the basis of those salaries. It forced finances to be an open book; every week I was pleading poverty to a different person. Every person who didn’t get a pay cut had to be continuously explained and justified, as discussions of who we would lose, who needed the money, and which contacts were not negotiable took the time and energy we needed elsewhere.

Everyone was constantly comparing their pay to everyone else’s pay, their cuts to other people’s cuts. When we agreed to salaries and an equity division, everyone put their personal incentives aside to play for the same team, but once pay was fluid, that became impossible. Even if they weren’t consciously doing it, almost everyone was signaling how valuable they were to the company, what they were worth in the market, and/or how much they needed the money or how much pay would be fair.

If we couldn’t pay full salaries, that meant we were in deep trouble (which we were, of course) so that was yet another reason to jump ship. Lots of time was spent holding the team together and preventing or postponing key people quitting.

A quality employee is worth far more than you pay them. A bad employee is often actively harmful. Figuring out who is who is expensive. Once you have both invested in finding a good match, there’s a lot of surplus, without which few companies can survive, and a huge zone of possible agreement.

Cutting pay is considered harmful for good reason. Bryan did an interview that went into some of the reasons why. I will affirm all the answers he gets, but would tie it together differently. When you decide what everyone is paid, your primary goal is to finish the discussion with everyone content so you can get on with business. By closing the door on the question of money, you can focus on the job at hand. By credibly committing to a deal, you can take actions that would cause problems in a future negotiation: Making someone indispensable, or investing in their skills and relationships, or giving up on other connections and opportunities to help the business.

Giving small nominal nominal raises, and mostly basing pay on your job title, makes that possible. This frees up time, gives better incentives, and lowers stress. People do not have to worry about being able to pay their bills, and they do not have to worry they are being cheated by someone who negotiated harder or gained leverage. Breaking the deal is high stress, destroys morale, and pits people against each other.

If I had to do it over again, even though it went well, I would not ask my employees to take pay cuts. If that had killed the company, the company was likely doomed in any case, and it would have let us all move on faster. Losing a job is a major disruption, but staying in one with little pay and no future is a trap; even if it did maximize our chances of success, keeping MetaMed alive for so long though such methods was in hindsight clearly a mistake.

 

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Wizards Implements Ochlocracy

Today, a player who recently made the Top 8 at a Grand Prix was banned for life from tournament Magic: The Gathering. His account on Magic Online was seized, and he will be given a check for what Wizards thinks that account was worth.

Wizards does not discuss the reasons for bans, but in this case everyone knows the reason: Then years ago, when he was 19, this person entered a guilty plea for aggravated sexual assault. He served three months in prison, and now does dozens of hours per week of community service, has married and is applying for admission to the bar.

This man, for the past ten years, has as far as we know committed no crime, violated no rules of Magic or its tournaments (other than accidental minor rules violations), done nothing wrong on any front.

Other than, it seems, his failure to die in a fire, which bugs the hell out of a certain group of people. These people, including one Drew Levin, took to Twitter and Reddit to demand that Something Be Done about this Rapist In Our Midst, when he had the audacity to actually do well in a tournament and come to the Twitter Mob’s attention.

In response to a quite small number of outspoken people, a person has been entirely purged from the game. No rule has been established that convicted felons, or sex offenders, or violent offenders, or those who inflict rare diseases on cute puppies (in order, of course, to soak up all the charity dollars as inefficiently as possible, thus denying those in need their Malaria nets and microloans!), will not be welcome at Wizards events.

Wizards statement on the matter was this:

“We work hard to make sure all players feel welcomed, included and safe at our events so that they can have fun playing Magic. We don’t generally comment on individuals or provide position statements in the abstract, but we take action to address player issues and community concerns when we feel it is necessary.”

In other words, Wizards has become an Ochlocracy: Mob rule, and that mob is an internet Twitter mob, which doesn’t even have the decency and costly signaling power to show up in person and procure a decent supply of physical pitchforks.

Whereas it turns out that the actual vast majority of the community does not see it this way. In response, the community is currently making it very clear that this effort to making everyone feel welcome is actually making us feel quite unwelcome, and that we are deeply unhappy about it. We are deeply unhappy that there is no announced policy. We are deeply unhappy that Wizards has bowed to a Twitter mob, thus encouraging more Twitter mobs, and emboldening exactly the wrong kind of toxic tactical behavior. We are upset that the system doesn’t care about due process of law at all, when that has been the excuse for not banning actually highly toxic people who ruined the tournament experience of everyone they played against, and who made the game look like it was filled with a bunch of scummy cheaters. 

Someone came back from a ban and wrote “Miss me?” on his top 8 form, and listed his favorite card as the one he was caught cheating with on camera. Welcome back! Someone was elected to the Hall of Fame, then banned and had it revoked. Welcome back! Things are no better than when Ryan Fuller spat in our collective faces and stomped all over the game’s good name for years before he was finally caught sufficiently red handed to be showed the door. Magic has had cheaters, but Ryan managed to actively make you want to quit Magic after every match against him. It was an art form. Where was our ‘answering community concerns’ and ‘good for the game’ back then?

The defenders of this act only highlight the problem. I was pointed to what I was told was a high-quality defense of the act. I responded thus:

If “rape is trump, rapist evil and if you disagree you’re pro-rapist” talk is the best argument for, that’s pretty sad.

That seemed accurate to me, and it is a very common tactic to say, if you do not like what I am doing, you can be equated with the worst trait of the person I am attacking.

I was informed that no, it was actually a better argument:

I would agree that logic is bad. I read it as “we should be glad a racist is gone, not defending his right to play Magic: The Gathering”.

But to me that is almost as bad. It is, as I put it, saying:

“These means are bad and we need to stop.” “But look at this sweet end! Isn’t it cool?” Even if I agree it is cool, #BigNo.

If I complain about the way you go about doing something, and you respond by saying I should instead be celebrating your accomplishment, that is in no way addressing my true objection or argument, which is that your means are awful and that we cannot abide this sort of thing if we want to keep having Nice Things and go about our days in peace. The counterargument to that seems to go along the lines of my original summary of the opposing argument, that rape is trump, rapist evil and I did something bad to a rapist so it was automatically awesome and why are we letting them sleep so close to those bridges anyway?

Where does all this lead? More Twitterstorm mobs, of course. Those who did this will not be satisfied to have justice done; they will feel emboldened to move on to their next target. The next time I want something done, my own first temptation and thought will be to start or stoke a Twitterstorm mob. Which is, effectively, what I did a decent amount of today in reaction to this event.

Hopefully the antidote to a Twitterstorm mob is an equal and opposite, or even larger, Twitterstorm mob in reaction. If giving in is clearly worse than standing firm, maybe some people will grow a spine and stand up to these mobs. This is the second time in recent memory this has happened in Magic, even, as another storm forced a website to retract an article and issue an apology, rather than saying “here is something some people disagree with, so let’s have a discussion.” The mob does not want discussion. The mob does not want debate. The mob wants scalps and apologies and agreement on everything, and it has zero interest in listening to your well-reasoned arguments, which are no match for their puny catchphrases.

This doesn’t just apply to Magic. This applies everywhere, to everyone. Just this past week I was discussing with my fellow aspiring rationalists ways to either harness or destroy the internet hate-mob, as it has become a clear and present danger. My proposal was to sufficiently subsidize or support (in various ways) victims of the mob, so that destroying someone simply wouldn’t work; it does not take very many people who like you to make everything all right, if they are willing to stand with you. I do not care that the vast majority of people would not enjoy my company, nor I theirs, nor must we do business.

The plan has some obvious giant glaring flaws (such as what happens when people try to false flag against themselves) but at its core, there seem to be three options. Two of them seem awful: we can let those You-Know-Whos that decide what the offense of the month is scare us all and control our behavior lest we be purged, or we can attack those who attack and make them pay. The third is to stand up and say: Hold. What you do is wrong. Why do you do this thing? Say it loudly every time anyone gives in to such a mob, and make sure they know they are giving in to a small minority, and by doing so they are destroying the trust and relationship they have with the vast majority.

The mob’s goal is to make you think it is them against their victim, because they choose unsympathetic victims: We have to make it clear that standing up against these tactics does not mean we agree with the actions of your victim. I do not care if the victim was asking for it. I don’t even care if the victim was a horrible person. I do not even care if we are better off with him being driven away. Hold. What you do is wrong. Stop doing this thing.

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The Thing and the Symbolic Representation of The Thing

Let’s assume there is a thing that all would agree is, in context, a Good Thing(tm) that someone in your situation would want.

Do you want the thing, or do you want the symbolic representation of the thing?*

This sounds like an easy question; obviously you want the thing! Alas, it is often not that simple. Even when the thing itself would be most valuable, often the symbolic representation of the thing is what is in demand and gets produced.

One of MetaMed’s biggest mistakes was not realizing that this applied to health care. As Robin Hanson put it, health care is not about health: The system is more concerned with making sure everyone is able to signal, to others and to themselves, that they care deeply and that they are doing everything they can. This drives people’s decisions strongly enough to usually dominate decision making when the stakes are high. The actual health effects of the decisions involved are often a secondary concern, and the costs a distant third. The risk of not doing the standard thing, or what your doctor told you to do, looms larger than the fact that you believe that the decision is wrong; if you go against that advice, then you are not doing the responsible thing, you don’t care for yourself or your loved ones, and everything that happens to you after that is your fault.

Unsurprisingly, this leads to some very poor decisions when looked at in terms of what has a positive impact on the people’s health. And of course, everyone involved being afraid of being sued (far beyond the statistical danger of actually being sued) every time they deviate from the standard of care makes this that much worse.

MetaMed’s central thesis was that people cared enough about their health that if the information on how to save their life was available to them, they would have to buy it, and they would be willing to pay at least a small fraction of what that information was worth.

This theory was tested, and was conclusively falsified. Or rather, the following was conclusively falsified:

If a person is convinced that information could become available that might save their life, that person will often be willing to buy that information for a small fraction of what that belief implies the information is worth to them.

The experiment was not a randomized controlled trial, nor was the sample size all that big, but the data was clear and conclusive: A non-zero number of people will do this, but the vast majority of people will not.

Two points of failure are being explicitly excluded here.

The first is: Did we actually have that information? I would argue that we did, and believe we very much did right by those who hired us in terms of getting them the information they needed and/or requested, but of course I am biased, and we will never know for sure.

The second is: Did we manage to convince people that we had or could acquire this information? Our success rate on this was not all that high; certainly the majority of people who considered this hypothesis rejected it, most of them doing so quickly. Like any good start-up, and many bad ones, we did not let this stop us, and we kept pitching. Eventually we found a decent number of people who we did convince. We should have been able to do this more often, and were improving at it, but that is another story.

The important thing is that while it was only a fraction of the people we attempted to convince, many people explicitly said that they believed we had or could acquire this information in exchange for money, and I have no reason to doubt them. We have a sample size well into the triple figures of such people.

The majority of them did not buy. Of those who did buy, the majority of them chose a project far smaller than their problems justified, and intensely haggled to make that size as small as possible.

Then, in the end, many were dissatisfied because we had given them the thing rather than the symbolic representation of the thing. In one case, the person went so far as to show us the symbolic representation of the thing that the person was hoping to buy – a very colorful and nicely formatted informational packet that did not contain the information this person needed to deal with their very serious health problem, in part because the packet was completely out of date.

It took us over a year, and over forty cases, to realize that when we delivered a report, it was not being evaluated on the basis of whether the information would improve health outcomes. It was being evaluated on the basis of whether it looked like an expensive report should look, and whether it looked like they had ‘gotten their money’s worth’ in terms of the work that was visible. The work that was visible, of course, was mostly distinct from the work that could make them healthier.

Over time, we moved from spending almost all our time and effort into helping find ways to improve people’s health, and inventing a system to make that happen efficiently without wasting money on other things, to figuring out how to make people feel listened to and show them (ideally grey-haired and well-credentialed) doctors that spoke with proper authority and confidence, and then give them reports that were laid out as beautifully as possible and looked expensive and professional, and do that as efficiently as possible so we could deliver our actual research payload that might actually help them. Everything depended on convincing the right people that we were capable of presenting the proper symbolic representations, so we could get continued funding for our operations and improve our symbolic representations in the hopes of finally being able to get more sales at the now much higher price point that was necessary in order to deliver the symbolic representation of our product, without which our product would never get to help anyone, as well as also deliver the actual product.

We had a bunch of people who care very deeply about helping and making sure the product actually works, and were deeply concerned about every minute spent on anything else, so the temptation was never there to only deliver the symbolic representation and stop actually helping people. I think that people who would have been capable of that would have never founded MetaMed in the first place! But that is the natural outcome of such a process after enough rounds of selection pressure: Only the symbolic representation remains.

A number of the products and services we attempted to buy, or which others attempted to sell to us, had either gone through this process or had skipped it entirely by never being real in the first place. Instead, they existed so that people could tell themselves they were doing a Responsible Business Thing that businesses needed to do, rather than working to get the benefits that thing would provide if it was actually done. Most times we hired people from outside the core team to complete key tasks, and those tasks could not be fully and explicitly specified, those tasks did not actually get done. Instead, the people involved did things symbolically representative of the task, and billed us or collected their salaries continuously until we realized the things involved never got done. When we then investigated, it became clear the decisions being made did not make any sense if one was looking to help a company succeed; they only made sense in terms of what would superficially look like doing the job if not examined too closely, or would be vaguely associated with the job getting done if one never thought about how things would physically progress from point A to point B.

Michael Vassar speculates that this has overtaken giant sections of the economy, and that many or even most products and services are symbolic representations of themselves first and the product or service itself second or not at all. I certainly find examples of this all around me. This last week, my wife and I went on vacation to a place that charges quite a bit of money for things that I see no value in, but which she enjoys greatly, and I believe that what she enjoys is that it symbolically says “Vacation” to her. I see the actual thing, and so I do not get it. That is fine. I am not the target (a powerful mantra!). Sometimes, what one needs are not expensive wines but expensive wine bottles. Other times one wants the wisdom, or lack of wisdom, to know the difference.

*The problem with talking about this topic is that I realized that every time I wanted to talk about the details, it would involve accusing someone of fraud or at a minimum completely missing the point, and be at least deeply insulting if not fighting words or grounds for a lawsuit. Thus, the motivating example of this post is completely missing, and a lot of details are being left out that would make this a lot easier to grok. But I’d rather post it this way than not post at all.

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Self Service Roundup

Follow-up to: Full Service

Before moving on to other topics, I thought I would round out my thoughts on self/full service itself (for some good follow-up on the drugstores, see the comments of the previous post) about the History of Self-Service, which I found fit my model of such things quite well, and summarizing key findings.

The idea that there is a natural free market, and a natural fair competition, between self-service and full-service was never the real situation. Instead, the two sides competed primarily at the state legislature, with both lobbying heavily to get laws that were favorable. In the beginning, the laws favored full service, then later they were more mixed. People were required to stay by the pump, making self-service worse, but the minimum wage going up made full-service better, and so forth. Regulations got increasingly complex and many entire chains could not hack it.

The hijack problem was also even more explicit than I realized, as self-service stations undercut full-service by also cutting out other services, not just the annoying “where is my tip” windshield cleaning but more importantly water and air, and emergency assistance. Having people able to assist you when you’re in trouble on the road, or in need of key supplies, is a valuable public good, because in practice one cannot charge what such things are marginally worth or anything close to it. Thus, Maryland’s stance that basic elements of assistance must be provided at all gas stations makes sense; you ensure good public goods and put everyone on equal footing. These requirements seem far more justifiable than building and supporting the road and interstate systems in the first place, which are massive subsidies to cars from taxpayers that advantage them hugely over other transportation such as our pitiful train system. America is built and designed around cars, and it is a conscious governmental choice. Once you mess with a market like that, it is hard to avoid messing with it further. In this case, the cost gets born by the people who use the services, in the form of a de facto tiny additional tax on gasoline, which is clearly under-taxed relative to taxation rates.

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What If It Rains?

Follow Up To: Full Service

Gas stations in New Jersey do not have awnings to protect customers from the rain. Let us presume for the moment that due to some combination of inertia, regulations and initial costs, it is not practical for them to create such awnings in the short term. Now suppose that New Jersey legalizes self-service. 90% of the time it is not raining, and the customers gain $0.25 of net utility from the cheap gas that comes from self-service. However, 10% of the time it is raining or snowing or something else unpleasant, and in those cases customers would on average be $5 better off if someone pumped their gas for them so they didn’t have to get out of the car. Some even get to avoid ruining their $60 haircuts.

A few stations switch to self-service. Ninety percent of the time, the sun is shining, and most customers choose to save a marginal amount of money and go to the self-service stations. With business drying up, more and more stations switch over, until most stations are self-service.

Then the rain comes, and everyone gets wet and miserable. The customers complain about how good things were in the old days with full service and say there ought to be a law!

One chain tries the obvious, which is to stay full-service, take a small loss when the sun is shining, and then charge an extra $4 per customer when it rains to make up for it. The customers go ballistic. Profiteer! Exploiter! Price gouger! Boycotts are announced and state senators are lobbied. Governor Christie warns that this is illegal activity under his interpretation of New Jersey law, the same way gas stations were not allowed to raise their prices after hurricane Sandy resulting in no one being able to buy gas without huge lines. The public cheers and his presidential campaign gets a boost, and the last of the full service branches go down. Self-service wins, everyone is miserable, and legislation gets reintroduced to return New Jersey to full service. Christie boasts that the repeal, passed over his veto, was a huge mistake, and adds mandatory self-service to his national platform, but loses anyway because he’s Christie.

What went wrong? Fundamentally, the problem is that consumers are unwilling to let prices change to meet supply and demand. Allocating scarce resources to those who value them most, and rewarding those who provide those resources so that people are encouraged to keep potentially scarce resources on hand, makes you history’s greatest villain. In the case of rain and gas stations, a few hairstyles get ruined and people are annoyed. During peak hours, movie seats and restaurant tables go to whoever was willing to make plans far enough in advance, rather than whoever actually values the experience. During real natural disasters like hurricane Sandy, it means the stores all run out of food and bottled water, and the gas stations run out of gas, and everyone spends all their time on lines, because the people who have real need can’t buy.  This isn’t getting better.

When it rains in New York City, people go out onto the sidewalks with umbrellas. They charge a premium price. This is a very good thing, because otherwise they would not be standing by waiting for it to rain, and if I get caught in the rain without an umbrella, I can get out of it. Technically, however, they’re breaking the law, and people get pretty mad about this, calling it ‘taking advantage of people.’ I often wonder about that term, it also came up last night at the rationalist meetup: Companies are taking advantage of people! You don’t say! Is that supposed to be a bad thing?

This is not a call for people to understand economics, grow up and pay these hardworking Americans their due for keeping emergency supplies on hand. If I thought that would work, I would totally do that, because that would be a huge win. You never know; please do share that message! Maybe Uber’s hard work wearing the black hat will warm people up to the idea a little.

The problem I’m actually wondering about is related but less clear, and has no obvious right answer that I can find. What people regularly buy allows profit to be made on a regular basis, and that is how you pay the overhead to run a business like a gas station or a store. If something is being bought all the time, it also means that a lot of places are offering to sell it. That item in general (e.g. gas or milk) provides a ton of utility if the alternative was to go without, but the utility of another place to get gas is only large if the next gas station is far away. If it is across the street, the only utility is that they are keeping each other honest on price, so you might save a few pennies.

The sheer amount of gas purchased is causing placed to have great incentive to hijack sales from each other. When this means price competition or quality competition, that’s great; without price competition we’d pay a lot more for most things. When that means a race to the bottom on price because everyone only has enough attention to compare prices, resulting in a sacrifice of everything else (for example, on airlines, which have migrated their fees into secret compartments) or the loss of a little extra service when that service would have been efficient (in the sense that it’s easier for an employee to do a thing, or their time is less valuable than yours, or something similar). Why in the world are customers now bagging their own groceries? It makes no sense… unless people are being trapped by comparisons into looking at headline prices and this is forcing the hand of grocery stores.

Even more toxic is the rush to hijack sales based on location. If I have a source of milk two blocks away, that is good enough for anyone, and I’d prefer to have a diversity of other things available for purchase at other places. Instead, someone opens up another drug store one block away… often a copy of the same store that is also two blocks away! The reason they do this is to hijack sales by being marginally closer, and therefore better, than the competition. The result is that a huge percentage of store fronts end up being effectively wasted on drug stores and banks, and endless copies of the same chains, when far more utility could be had with something more unique, but which would get less business.

I have no idea what to do about this, even in theory. But it is clearly a problem, and it would be great if we could solve it.

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Full Service

New Jersey has a law that says that you are not allowed to pump your own gas. They have had this law for 70 years. This is, of course, absurd. But if it is so absurd, why do 63 percent of residents actively want to keep the law, preventing Captain Obvious (full official name: State Assemblyman Declan J. O’Scanlon Jr.) from leading a charge to repeal the law? What does this anomaly have to teach us?

The arguments for self-service gas are clear. Pumping your own gas is faster. Pumping your own gas is cheaper. Pumping your own gas avoids someone trying to use other ‘services’ to extract tips from you, which can be stressful. The market has spoken: The ban was originally put into place because people were voting with their feet and wallets for self-serve gas, and self-serve gas has completely won the market battle wherever it hasn’t been banned. People have a revealed preference for self-serve gas. That is a rather strong case, even without the libertarian argument and/or the argument from complexity, that banning an obviously sensible activity damages our freedom, encourages further regulation and other not-so-neat stuff like that. Captain Obvious has so failed to find a good explanation that he has claimed that “The only way to win the argument is if you can make a legitimate argument that New Jersyans are more flammable than other people.” What is the motivation here?

The article draws attention to several interesting potential explanations. Interestingly, it skips over what I would consider the most obvious explanation behind the law, so let’s look at that first.

The easy and most obvious explanation is that the law is about make-work. Gas stations are forced to hire attendants, which are jobs that would not otherwise exist. People who are otherwise zero marginal product laborers (ZMPs), with no skills to contribute, get gainful employment and stay off the public dole in an era where machines are taking their jobs. Ideally they develop good work habits, get experience and eventually make something of themselves. Unemployment is very bad, and pumping other people’s gas maintains the illusion of productivity without doing harm. Back in the 1940s when the law was originally passed the economic logic behind this did not hold water, since there were plenty of manual labor jobs, but today there are not enough such jobs, so there is a case to be made here, but it is not the case anyone seems to be (explicitly) making.

The argument that New Jersey has lower gas taxes and is close to refineries, and thus its gas is cheap and people do not realize how much they pay for pumped gas, may be a small part of the story, but also does not seem adequate. The argument that the gas tax in New Jersey would rise to capture the savings from self-service, and thus full service is effectively free for motorists, is more interesting, and I want to explore more situations of that type in the future, but since prices are already relatively low in New Jersey and the gas tax did not go up as a response, the story does not seem right.

I asked my wife Laura, who had the misfortune to grow up in New Jersey, to explain:

“I would pay two dollars to have my gas pumped. Self-service is annoying! You have to get out of the car, it could be raining, you can spill gasoline on yourself, and then you have to go inside with that little receipt…”

We live in New York City now and it has been a while since she has pumped gas. I explained that the receipt is no longer necessary. This made her less annoyed, but did not change her opinion, as two dollars is still way more than the marginal cost of full service gasoline.

I asked her if there should be a law banning self-service. She said no, of course not, just because I prefer something doesn’t mean there should be a law! She’s pretty awesome. I did point out that in this case it is not that simple, since if you do not mandate full service, full service ceases to exist, but I am happy to report that this did not carry the day.

This was anecdotal evidence in favor of, to quote the New Jersey Senate president, Stephen M. Sweeney, “People have gotten used to it. We like it.”

There are a few ways to look at this. The first is to use the Caves of Steel argument that tiny luxuries are very painful when they are taken away; loss aversion is always bad in humans, but here it is amplified even more. Thus, if you are used to someone else pumping your gasoline, you do not want that taken away from you, as pumping your own gas is “so annoying” even though no one else seems to mind. The article quotes woman-at-the-pump Nicole Mills: “It’s like a little highlight of the day to have that convenience.”

Could it be that when deciding where to go, people are undervaluing small niceties like pumped gasoline? Certainly the cost-benefit ratio seems much better than for more expensive luxuries like nice restaurants or first class plane tickets. When deciding where to get gas, people have been trained in a very simple algorithm: Cheap gas. People hate paying too much for gas. As a result, people are completely obsessed with getting cheap gas, and will be inconvenienced a crazy amount to get it.

A perfect illustration from Gilmore Girls:

LORELAI: No more picking loose change up from the ground. No more driving around looking for cheap gas.

RORY: Which totally defeats the purpose since you wind up using more gas looking for the cheap gas.

These instincts come from fixed-supply-of-money-from-work budget-style planning, where you have exactly enough cash and cannot spend other resources to acquire more except at horrible rates (see yard/bake sales) because making money outside of your job, or working on improving your pay, are not things. This means that spending ‘unnecessary’ funds is toxic, even when the amounts seem relatively small, because it will hurt your ability to get everything you need, and need includes keeping up with the Joneses. If you hired someone else to pump your gas, you would feel guilty, you would break your budget, and you would feel like you were doing something only an upper class person would do – you are bringing in The Help!

If on the other hand you are forced by law to have someone pump your gas, then you get to enjoy your luxurious benefit guilt-free, and the Joneses have to buy it too so you can keep up with them without breaking your budget. Life is better.

Individually, everyone chooses cheap gas. But everyone would be better off if they were forced to not choose cheap gas. In fact, if conditions are right, everyone would be better off if they and only they were forced to pass up the cheap gas. It can also be thought of as a gift: The gift of pumped gas. You would feel weird buying it for yourself, defeating the purpose. But if someone else (say, the State of New Jersey) were to buy it for you? Just what you always wanted!

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NFL is a perfect example of complexity creep

The NFL has voted to adopt a new rule that extra point attempts are snapped from the fifteen yard line, whereas two point conversions will continue to be run from the two yard line, but with the additional rule that if the defending team can run it back, they can score two points.

This rules change should be taught in game design class as a perfect example of how not to pick rules. Having an offensive play with an option to do a kick instead is part of the core rules, and an extra point follows those rules. You can fake or botch a kick and run the ball in, you can line up (as Oregon often does in college) to go for it and then kick instead if the other team defends properly. With different places to snap the ball, they are effectively now two distinct plays, both of them seem more arbitrary, and the whole thing is inelegant as hell.

Football is not an emergent property of a simple idea like basketball or soccer, instead being the result of a century of tinkering. I would guess that all alternate timelines have soccer, and most of them have basketball, hockey and tennis, but many of them never got anywhere near football. If everyone forgot about football, the game would be impossible to recreate because the intermediate steps are not good games. The rules for football need to be complicated in order to properly balance offense, defense, fairness, strategy, player safety and spectacle.  Games that are never quite over are not a naturally occurring phenomenon; the endgame in particular is engineered to make sure comebacks are possible.

Partially as a result of this, football is a complicated sport, sufficiently complex that many of my friends have no idea how the game works or what is going on. A large part of why the game hasn’t caught on in other countries is that you need someone to tutor you in how the game works or you will not understand it. The rules and strategy of the game are so complex that every coach in the NFL regularly botches basic strategy, because no one person has the time to learn how to play all aspects of the game properly.

What the NFL does not appreciate is that complexity and elegance are also key values that need to be considered when choosing how they want to play their game. The right response to a problem is not to add a new hack to the rules set! The right response is to figure out how to get what you want in a simple and elegant fashion.

What goal is the NFL trying to accomplish here? The stated problem is that the extra point has become so reliable that it has become a ‘ceremonial play.’ Is that a problem? It is a small problem, in the sense that it takes up a few precious seconds of television time that could be better spent on something else. It does serve an important purpose, however, which is to give a confirmation that the touchdown is final. With all the penalties, and with all scoring plays automatically reviewed, kicking the extra point is as good a way as any to say that the play will stand, which gives it a purpose. Since you can set up for the play while they do the review, very little time is lost unless you would otherwise proceed to the kickoff right away, but that is a reasonable thing to want to do.

Certainly making the extra point optional is the natural response to this problem. If a play does not matter, get rid of it; games being decided by botched extra points is not something many people would miss. Kicking the ball off without going for two scores you a seventh point, or you can line up to go for two instead. Simple, quick and effective, with if anything one rule less than we had before rather than one rule more. A 93% extra point from the fifteen yard line is still a waste of a play that could be better spent elsewhere if that is your true objection.

Their true objection probably was not the wasted time, however; their true objection is that they want teams to use the two point conversion more and kick fewer extra points. Making extra points harder certainly helps incentivize this. Let’s suppose this is the true (or at least primary) objection and goal. What should the NFL have done?

One possibility would have been to keep the rules the same and send all the coaches (and announcers, so they don’t put the wrong pressure on the coaches) back to school to learn basic strategy, because teams should already be going for two far, far more than they do. For example, a team is down 14 with 3:00 to go, and scores a touchdown. If they go for two, and succeed, a touchdown wins the game. If they fail, and they get another touchdown, they can go for two again; if they fail to get a touchdown or the other team scores, they lose the game regardless. So even if you only succeed 40% of the time, which any reasonable team can do, you should obviously go for it. This situation comes up constantly, but the chance of this happening in a real game is basically zero. A cool puzzle is to solve for all situations where the break-even point is substantially below 50%.

Alternatively, teams could hire an endgame specialist, and have that person bark orders in the coaches’ ear in such spots.

A second possibility is to make ties unequal. Right now, if the game is tied after regulation, overtime is played as a level playing field. If the playing field in overtime was not level, that would give one of the teams strong incentive to avoid ties, and one good way to do that is to go for two! Possibilities include the home team getting the ball in overtime, the team that ended regulation with the ball keeping it, or the last team to score having or not having the ball, or breaking the tie with some statistic that could then be tracked by the teams (could be yards, time of possession, fewest penalties, you name it). This does mean adding an extra rule, and it would lead to cries that such a thing is unfair, so it is almost certainly a non-starter, but it is a space worth exploring. Bowl games get lots of two point conversions this way at the end, because often neither team wants the game to go to overtime!

A third possibility, which I would have advocated for, is to do the natural, logical thing and move the ball to the 1.5 (or if necessary, even the 1) yard line for both extra points and two-point conversions. Instead of making extra points worse, make conversion attempts better. If you think you can make it more than half the time, which is an excellent reason to go for it that even football coaches can understand.

A fourth possibility, which I also would have advocated for, is to make the goalposts narrower, which makes all field goal and extra point attempts harder. Field goal kickers have gotten a lot better, and making their life harder would improve the game while adding danger to an extra point attempt as a positive side effect.

Every rule of a game, or law of a land, adds complexity and that complexity is a much bigger cost than people realize. Reducing the number of rules and making the remaining ones as simple and intuitive as possible is more important than getting a particular corner case to go the way you want it to.

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