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.

Turkey Flow Redux

Author’s Note: Today, in time for you to plan your Thanksgiving, I repost one of my most popular entries, the turkey preparation process flowchart, with some handy 2019 updates.

Perhaps someday I’ll write a book that is nothing but flow charts. They fascinate me! My Turkey Dinner flowchart encompasses everything you really need to know about preparing the meal from three days out, including a logarithmic scale. But, wait– I’m getting ahead of myself. Let’s take this step by step.

You can start with a simple set of process steps, which I show below to use as a building block for what is to come. When I show you the full, unadultered version, your head will explode.  Bear with me.

Turkey cooking flowchart
Turkey specific flowchart, by kajmeister.

Clearly, everyone has their own T-day traditions, whether it’s deep-frying the turkey (dangerous but popular) or serving crab (very San Francisco) or canned cranberries (really?). I will map out the standard meal with the basics: a stuffed turkey, gravy, and ancillaries to put the gravy on. Maybe a few vegetables, too.

In our house, we brine the turkey–which has its supporters and detractors I know–and we saute fresh green beans and mushrooms, rather than bake them in a soup. Plus deviled eggs because it’s not T-giving without deviled eggs. By the way, if you don’t waste spend loads of time watching cooking shows as I do, you should know that “sous chef” is short hand for all the prep work that you do which doesn’t involve heating or freezing the food–chopping, measuring, mixing, and making room in the trash and compost for all the potato peels, onion skins, and turkey liver. No, you don’t eat the liver. I don’t care what your grandmother did. Gizzard, neck, and heart, ok; liver, no.

Continue reading “Turkey Flow Redux”

Flow, Turkey, Flow

I have family coming up for Turkey Day, so I need to get my act together. Everybody seems to like a good flowchart, so it seemed a natural to create a Turkey Dinner chart for this week’s blog and publish it a few days early. By Wednesday morning, I’ll be deeply involved in planning the tryst between turkey, stuffing, and butter. (Hmmm, should that really be menage?…)

Turkey cooking flowchart
Turkey specific flowchart, by kajmeister.

Clearly, everyone has their own T-day traditions, whether it’s deep-frying the turkey (dangerous but popular) or serving crab (very San Francisco) or canned cranberries (really?). I have aimed to map out the standard meal with the basics: a stuffed turkey, gravy, mashed potatoes, yams, and cranberries. Our household variation is to brine the turkey–which has its supporters and detractors I know–and to saute green beans and mushrooms, rather than to bake them in a soup. Plus deviled eggs because it’s not T-giving without deviled eggs. By the way, if you don’t waste spend loads of time watching cooking shows like I do, you should know that “sous chef” is my short hand for all the prep work that you do which doesn’t involve heating or freezing the food–chopping, measuring, mixing, etc.

The simplest chart would have only a few steps, and I show it above to use as a building block for what is to come because if I showed you the full, unadultered version at this point, your head would explode.  Bear with me. Continue reading “Flow, Turkey, Flow”

‘Tis a Mystery: Where Do Mysteries Come from?

Sherlock Holmes playing the violin while puffing on a pipe, gray smoke misting the air like thoughts of inductive reasoning… Hercules Poirot sipping on his tisane while musing with his little gray cells…Mr. Monk framing the room with his hands… Columbo, hand to his forehead, dripping cigar ash on his raincoat…such detectives have captured popular imagination for centuries and are among the most famous of our modern heroes. Mysteries have nearly eclipsed novels as popular reads. Agatha Christie is called the world’s best-selling author with two billion sales of her 66 detective novels.

How did we get here?

Most discussions of the history of the mystery define the universe as related to detective fiction — a premise I grant — and suggest that Poe’s “Murder in the Rue Morgue” was the beginning of the mystery. But let’s go back a little further. How does Poe’s 1841 short story about a detective, C. August Dupin, arise into existence? What were detectives before then? Didn’t anyone write short stories? Didn’t anyone write stories about people who investigated things? Continue reading “‘Tis a Mystery: Where Do Mysteries Come from?”

Can You Hear Me Now?

Aliens plop down on earth. Humans wonder what the aliens want. What do they want? How do humans know?  This is the conundrum created by many a science fiction movie and at the heart of the excellent new film that’s generating Oscar buzz, though little attention otherwise, Arrival.

20161214-arrival1

There are a set number of possible options for an Alien Landing plot, many of which have formed the core famous and infamous science fiction premises. Often, the aliens mean harm or pretend to be nice but then mean harm OR some are nice but are fighting with others who mean harm. So getting eaten/enslaved/destroyed is a fairly likely occurrence. But then, how do humans know? Someone has to ask, and how do you speak to an alien?

As most movies are aimed at the lucrative 13-15 year old boy market, many Alien Landing plots involve the shoot first variety. If you google “Alien Invasion,” you can even see the top twenty or thirty of these movie types.  But Arrival is about the communication process itself. Since there is such a huge possibility that the aliens still might have nefarious intent, the armies surround the aliens and point guns at them. You can’t help but marvel at the stupid efficiency of the American army as it erects tents and hazmat facilities and communication centers without the slightest clue of whether any of that will be helpful. (Turns out most of it is not). They at least have the sense to bring in Amy Adams, who plays linguist Dr. Louise Banks, to bridge the communication gap.

20161214-aliens-land-flow-chart
Aliens Land Now What flowchart (kajmeister)

Continue reading “Can You Hear Me Now?”