How could a book about indirectly solving problems and one about human motivation be saying the same thing?
Chapter 1 (and more) is about happiness. We’ve been here before — with a review of The Happiness Equation. Unlike The Happiness Equation, this book gives us some real insight into happiness.
Kay divides happiness into short-term, medium-term and long-term. We might expect happiness to aggregate across time like log returns — lots of good short-term sums into a good medium-term. Kay has a counter-example. Consider a mountain climber that purposely creates short-term hardship in order to gain medium-term happiness. The more severe the short-term hardship, the more medium-term happiness (assuming survival).
Chapter 2 argues that companies that explicitly attempt to maximize profit tend to do very poorly at achieving profit. The fund management idea here is to short companies in proportion to their stated drive to maximize profits.
Random portfolios serve as an example of an oblique solution — creating a lot of things that never existed in order to see more clearly what did exist.
Here is a passage that quants might usefully think of:
The computer is very good at solving the problem we have specified and asked it to solve, but less useful when we are not quite sure what the problem is.
The added value of humans is not solving equations, but of weighting up how the models fit and how they don’t fit.
A key concept in the book is what Kay calls “Franklin’s Gambit” after a quote of Benjamin Franklin:
so convenient a thing is it to be a reasonable creature, since it enables one to find or make a reason for everything one had a mind to do.
We are less rational than we think, and trying to be entirely rational is generally a bad idea.
Here’s one more quote. It is a bit out of context here, but I think it is wonderful and deserving of more airtime. It is Francis Cornford speaking:
Every public action which is not customary, either is wrong, or, if it is right, is a dangerous precedent. It follows that nothing should ever be done for the first time.
A video of 53 minutes from the Royal Society for the encouragement of Arts, Manufactures and Commerce (RSA).
Daniel Pink talks about research that has been done on how people are motivated. There are two basic modes:
Extrinsic motivation is the well-known carrot-and-stick approach. This seems to only be useful when there is no intellectual challenge involved in the task. It is often harmful actually.
Pink identifies three characteristics that form the basis of intrinsic motivation:
If people are to be self-motivated, they need the freedom to do what they want. They need to develop a sense of mastery of their skills. There needs to be some larger goal.
From TED (19 minutes).
The Obliquity-Drive connection
Both books are about people doing tasks. Drive is from the point of view of the people. Obliquity is from the point of view of the tasks. They both divide tasks into:
- not straightforward
Straightforward tasks are suitable for direct solution, and this is where carrot-and-stick motivation is useful.
The other tasks require oblique solutions and intrinsic motivation.
John Kay has written at least one other very insightful book. That book is The Truth about Markets.