Going Once…Going Twice…

“Paul, it’s Bob Wilson. You’ve won the Nobel Prize.”

A security camera in front of Paul Milgrom’s home in Stanford, California, recorded Wilson and his wife Mary sidling up to Milgrom’s front door in the predawn darkness and repeatedly knocking and ringing the doorbell to wake him up. After a short pause to take in the momentous news, Paul Milgrom responded, “Wow, yeah. Okay.”

Story by Melissa de Witte at stanford.edu.
Robert Wilson and Paul Milgrom, photo by Andrew Brodhead.

The Nobel Prizes for 2020 were announced earlier this month. I thought I should take it on myself to understand what it was that earned these folks the Biggest Blue Ribbon for Brains in the world. I know just enough economics to get myself into trouble, so this could be fun. Economics (and science for that matter) are like languages that I speak badly (hablando de español…) I can almost read economic theory with a little wikipedia and dictionary.com at hand, but writing about it might generate some misinformation. Nevertheless, let’s dive in and alleviate your curiosity. I know you saw the awards but did you understand what they were for. I’m especially proud since northern Californians took four out of the eleven Nobel awards, two from my alma mater and two from its rival but still my peeps, woot woot!

Not All Auctions Involve Cattle or Eyebrows

My favorite award this year has to be the Prize for Economics, which usually annoys me in its advancement of “free markets,” which aren’t. This year, however, the theories were comprehensible and practical. Understanding the math is something else entirely, but never fear—we won’t go there. Two fellows from Stanford (take off that red shirt!) won for their development of Auction Theory.

When I think of auction, I always visualize a Texan with a big hat and microphone who sounds something like Leroy Van Dyke, in his famous song from the 1950s:

Either that or auctions make me think of a scene in a spy movie or comedy, where fancy people are seated in a room, and the British butler begins auctioning the mysterious painting or golden egg or Wonka ticket, which might hold a clue to the whereabouts of the Austerioserlian terrorists. Numbers are randomly repeated as he points at audience members who do nothing more than move an eyebrow or lift a pinky. Or, if it’s a comedy, the lady inappropriately dressed keeps accidentally bidding when she sneezes. To me, that’s an auction. It turns out that those are not the only types of auctions.

Auction from the First Wives Club. Photo from artnet.com.

Those auctions are known as open-bid English auctions, where the price moves from low to high. There are also Dutch auctions (aka clock auctions), where the price starts high then moves down, as well as sealed bid auctions, multi-unit auctions… but wait, there’s more! These Stanford professors won their prize for describing the theory of combinatorial clock multi-unit auctions.

Let’s translate that into English. They were interested in auctions where things were sold in groups, where the price of the whole might be more than the sum of the parts. Multi-unit or combinatorial auctions might apply, for example, to estate sales. The clock part means an auction where the price for the whole is set high, then the auctioneer lowers the price, or combinations of prices, until a bidder accepts it.

Combinatorial Clocks Are Even Better With Flowcharts

What if buyers don’t want to buy everything in the group, but bundles of things? The tricky part for the auctioneer is to look at all the bids for various combinations of the items and determine which will maximize revenue for the auctioneer. This became an important practical challenge when the FCC decided to auction off radio frequencies, which before 1994 were allocated without auction. The combinatorial clock format worked better for the telecommunication industry, while the federal government (i.e. us taxpayers) earned more overall. The format the two prize winners invented (Simultaneous Multiple Round Auction) helped provide bidders with more information about what others were bidding, which improved the bidding process for everybody. I agree; more information = better.

Once I started looking at pictures related to combinatorial clock auctions, several flow charts popped up, so of course I was instantly in love:

From a fascinating treatise on “Market Design and the Evolution of the Combinatorial Clock Auction” here

What makes the combinatorial clock auction work is the ability to create multiple rounds and the ability for bidders to select multiple bits and pieces, kind of like off a Chinese menu. Still, the very idea of radio stations today is somehow quaint. The last time I was poking around the AM dial, looking for some sports or palatable music (I’ll even take Katie Perry, come on!), all I heard was enthusiastic warbling about Jesus, singing in Spanish, or conservative talk radio. Although I didn’t really stay long enough to hear if it was conservative, they just sounded angry. I’m sure my 23-year-old would patiently ask me why I didn’t just turn on Spotify.

Photo without Covid effects in the Financial Times, taken by Andrew Brodhead.

Curses, I Paid Too Much!

Wilson, the bespectacled grinner on the right, turns out to have started an economics dynasty. Milgrom on the left was one of his students and the third “offspring” to have won a Nobel prize–the fourth person related to Wilson if you count Wilson himself. Which we probably should.

What Professor Wilson was himself especially noted for is developing an understanding about “the winner’s curse.” People often bid less than the value of an object because they fear overpaying. Nobody wants to bid $45 for an object that ends up with a resale value of $2.99. Wilson’s work also demonstrated why having more information on common objects, such as on resale values, improves bidding.

It saves a lot of time on eBay when you can see whether other people have actually sold the precious Genuine Vintage Antique doodad that your Aunt Sadie left you, which you were planning to post for sale. If the other sales don’t even cover the shipping, then you might want to see if Sadie’s grandchildren would prefer to just keep the thing. Especially if it’s this kind of combinatorial clock:

Photo from pinterest.

I think I’ll pass bidding on that one. On the other hand, if you find one in the shape of a parasaurolophus, let me know.

M is for Meter (not Mile)

For all of you who are big Hamilton fans or fancy yourself knowledgeable about U.S. history, you ought to be able to tell which of the Founding Fathers was the biggest francophile, the guy who thought France was the bee’s knees.

Joseph Dombey, French metrics expert, and Thomas Jefferson, French expert who was metri-curious. Photo at NPR.org.

You recognized old Tom Jefferson, naturally, who said:

In what country on earth would you rather live?—certainly in my own…What would be my second choice?—France.

Jefferson’s Autobiography, 1821

Where do you suppose the metric system got its start? That’s right: France. So why in the heck, given that Jefferson loved France, and France loved measuring things in hundredths, and Pierre de Coubertin was also French and gung ho on the Olympics, why in the heck do they run a “metric mile” which isn’t even a mile? It might be due to simple circular reasoning. Or pirates.

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Gimme Shelter, Gimme Testing Data

On Day 2 of our Alameda County Shelter-in-place order, I am creating graphs, mostly for my sanity. Today’s topic is data, in particular, Covid-19 testing data. If you’re a data geek like me, this is for you.

I have blathered on for days (?or is it weeks? I’ve lost track…days seem like weeks) that our biggest problem right now is lack of testing. We don’t know what we don’t know. Because the U.S. didn’t roll out testing capacity early on, people who feel sick or at risk for Covid haven’t been able to get tested. We’ve heard that for weeks and are still hearing it. Because people who know they’re sick can’t get tested, we have no idea who is sick and how many would test positive. Without knowing that, everyone has to STOP moving. That’s the problem right now.

Yes, it’s definitely a problem that hospitals are starting to become overwhelmed and might become swamped. It’s definitely a problem that travel is cancelled and that there is a black market for toilet paper and sanitizers. (Anybody know where we can get some ramen? That turns out to be a big concern in our house.) It’s an even bigger problem that we don’t know how long this will last, and we won’t know until there’s a robust testing structure in place. South Korea put in an excellent testing structure early on, and they seem to be moving into a better part of the pandemic curve. We can learn something from their experience, and we can learn something looking at data.

The Most Important Data Is Under-Reported

The problem has been a lack of good data, and good testing data is still hit and miss. In a world that’s used to hitting the “refresh” button every minute and seeing numbers update, having data that is only reported every few days or not at all is killer to the psyche. Up until about a week ago, data on how many people were being tested was nearly impossible to find. This was due partly because few had been tested; I might also speculate that some didn’t want the public to know just how few that was.

I can illustrate this by looking at Daily Case data compared with Daily Testing data. Here is the number of cases in California, shown per day and total to date. By the way, note that the red bars (daily cases) are linked to numbers on the left side and the purple line (cases to date) linked to the right side. Showing data on different axes is important because if you show cumulative and daily on the same graph, the cumulative would make the daily increases too small to see. You would have no sense of the underlying infection curve.

Graph of California Covid cases
Graph by kajmeister based on data sources in COVID Tracking project.
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Why They Play the Game

Spoiler Alert… Today’s post is about football (American football, yes, I see you, non-US friends)…If you refuse to read posts about football on principle because of CTE, the outrageous amounts of money involved, or excess testosterone, I appreciate your perspective. But, sorry mate, My Team is GOING TO THE SHOW! I need to talk about it.

Red, White, and Gold is coming. Photo from Sporting News.

I do like me some sports, so much so that I wrote a book about ’em, and I do like my teams, especially when the team works together, has intelligent leadership, and has fun. I can’t help but think about this approach as business model, ’cause I’m an MBA and organizational behavior coupled with analytics is in my DNA. After all, it says “statistics” right there at the top of my site, plastered across the California hills.

Thirty Runs

A curious thing happened after the Niners completed their 27-10 drubbing of the Minnesota Vikings in the playoffs. One player after another started mentioning how many times the ball was run. Not just the coach or the running backs, but the tight end (who catches passes and blocks) and the defense:

I think 47 rushes is pretty good, right? I think we had close to 200 on 47 rushes. …Playing against six techniques with the linebackers on the inside, it’s pretty easy to get those combo blocks up to them.

George Kittle, tight end (offense)

That was the biggest thing for us this week is trying to get 30 runs. We had like 40 or something, 47. We knew if we did that we’d win.

Nick Bosa, defensive end

It’s one thing for the coach to come out after the fact and mention that their goal was thirty runs. It’s another for all the players to have known that was the collective goal as well. Perhaps it’s easy in retrospect to claim that the Niners are a running team because their two playoff games were rather lopsidedly run-based. However, none of the rushers would be considered exceptional (until last week), and we fans were nervous throughout the season about the “run by committee” approach. We’d love to have a true star running back (a la Derrick Henry of Tennessee) or a quarterback with a bit of mobility (like Patrick Mahomes).

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Trigonometry: Secant-ing out New Life in Ancient Civilizations

Plimpton 322 from sci-news.com

It’s irresistible. The siren song of Wikipedia calls to me. All I was trying to do was find out which Greek invented trigonometry. Was it Pythagoras and his bean-renouncing cult or someone else? And I come across this enticing little tidbit, a curious little reference which, to a history buff is like the smell of fresh cookies…

Based on one interpretation of the Plimpton 322 cuneiform tablet (c. 1900 BC), some have even asserted that the ancient Babylonians had a table of secants.[8] There is, however, much debate as to whether it is a table of Pythagorean triples, a solution of quadratic equations, or a trigonometric table.

Wikipedia: History of Trigonometry

Much debate? Some have asserted? This sounds like historical mystery to me. I was instantly overjoyed at the thought of poking around to see if anyone denounced anyone else in the public square or started fistfights or wrote long letters to the editor of scientific journals about how their enemies were cretins who didn’t know a hypotenuse from a hippopotamus. And I wasn’t disappointed.

Don’t Be Afeared, it’s Just Math

First, a few definitions. Even if you’ve never taken trigonometry or if the very word causes you to put a blanket over your head, don’t worry. Imagine that it’s a warm sunny day in Greece (or Babylonia or Sumeria or Egypt) and you notice that the pillar of the nearby temple, next to where you are sunning yourself, throws a shadow. Since you like to measure things, you get out your handy measuring stick and you measure the length of the shadow. You know the length of the pillar. You start doing calculations.

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