Climate scenarios, worse case + best case unlikely

An assessment of Earth's climate sensitivity using multiple lines of evidence. https://doi.org/10.1029/2019RG000678

“Earth's global “climate sensitivity” is a fundamental quantitative measure of the susceptibility of Earth's climate to human influence. A landmark report in 1979 concluded that it probably lies between 1.5‐4.5°C per doubling of atmospheric carbon dioxide, assuming that other influences on climate remain unchanged. In the 40 years since, it has appeared difficult to reduce this uncertainty range. In this report we thoroughly assess all lines of evidence including some new developments. We find that a large volume of consistent evidence now points to a more confident view of a climate sensitivity near the middle or upper part of this range. In particular, it now appears extremely unlikely that the climate sensitivity could be low enough to avoid substantial climate change (well in excess of 2°C warming) under a high‐emissions future scenario. We remain unable to rule out that the sensitivity could be above 4.5°C per doubling of carbon dioxide levels, although this is not likely.”

And from Bloomberg:

“A major new study of the relationship between carbon dioxide and global warming lowers the odds on worst-case climate change scenarios while also ruling out the most optimistic estimates nations have been counting on as they attempt to implement the Paris Agreement.

A group of 25 leading scientists now conclude that catastrophic warming is almost inevitable if emissions continue at their current rate, even if there’s less reason to anticipate a totally uninhabitable Earth in coming centuries. The research, published Wednesday in the journal Reviews of Geophysics, narrows the answer to a question that’s as old as climate science itself: How much would the planet warm if humanity doubled the amount of CO₂ in the atmosphere?

That number, known as “equilibrium climate sensitivity,” is typically expressed as a range. The scientists behind this new study have narrowed the climate-sensitivity window to between 2.6° Celsius and 3.9°C..

That’s smaller than the current range accepted by  the United Nations-backed Intergovernmental Panel on Climate Change, which has for almost a decade used a spread between 1.5°C to 4.5°C—a reading of climate sensitivity that has changed little since the first major U.S. climate science assessment in 1979. Improving these estimates is “sort of the holy grail of climate science,” says Zeke Hausfather, director of climate and energy at the Breakthrough Institute and one of the study’s authors.”

Short comment:

How many CO2 doublings from preindustrial levels of 285ppm we are going to see?

We are now at 415ppm (0.7 doublings), a likely range is 0.9 to 1.2 doublings by 2100. (RCP8.5 and SSP5-8.5 involve 1.6 to 2.0 doublings, but are not now plausible.)

The worse case 4c + scenarios are now looking unlikely. But so is sub 2.5c. This still argues for action to limt warming to - say - 3c. But it likely means adapatation/mitigation along with innovation could be higher priorities (not that this area is really on govt agendas at all). 

Links:

Paper here.

Bloomberg article here.

Speed, advantages and considerations, John Collison interview

A recent interview with Stripe co-founder, John Collison, has plenty of food for thought (link end) especially around what makes successful start-ups, businesses and what we can learn from congleremates, being an outsider to America and technology. One item raised, I’d like to discuss is:

Speed

This is the idea of speed as an under-recognised competitive advantage and a defensible one. Collison applies to business and start-ups but I think it can be applied to make areas of life. In particular, I am thinking of theatre making and personal life decision making.

Jeff Besos has articulated a related idea on what he calls Type 1/Type 2 decision making. A few decisions are heavy weight, very hard to reverse course and require considerable due diligence before making. These decisions are rare and more rare than most believe. (In this framework) Most decisions should be made fast because they are not heavy weight, not hard to reverse and the answers may only come from experimenting with the choice. (This leads to the notion of “Disagree but commit”  another Besos/Amazon idea that you might disagree but that shouldn’t impede the decision being made fast.)

Collison makes a point I believe to be true but is seldom raised.

“Speed” is attractive to a certain type of person. This type of person - and for business this is typically an employee - can have particular creative qualities (and often not fit in well with the bearocratic nature of big companies - and slow moving nature of some).

While Collison talks about start-ups and business I think you can apply this to the arts and theatre making. Some theatre makers like to be speedy, make fast decisions, create work quickly and show it fast and early. Others are slower in approach. This extends to organisations.

The rule of thumb might be that larger organisations are less speedy but Collison makes the point that this is not necessarily so. Collison argues that Facebook and Google/Alphabet can very fast when they commit. Amazon as well.

However, it does seem true to me that many large organisations do lose this quality.  There are intersectional reasons for this: culture, growing risk aversion, complexity, number of humans involved and differing goals.

But for large organisations that can keep this ability and have it infused in their culture, it can be an important advantage. This idea is related to Jeff Besos stating his wish for Amazon to always be a “Day 1” company.

If  we believe it’s not merely size of company, can we highlight other aspects? I mentioned culture (set by the top people and embodied by all people) as important but more complex to set. I think size of team is a controllable item.

Collison also suggests this. He argues that a small team (even a solo person) can often make breakthroughs or create solutions where 300 person teams fail. The academic work on the nature of innovation - incremental or step change - and size of team is mixed but I think Collison has observed a general truth about small teams.

Certain managers in certain large organisations understand this, they assemble small teams typically with people who tend towards the effective and speedy spectrum, and they task them with solving something important.  

That’s not to confuse when a heavy weight decision needs to be made. But, a decision on whether to marry is seldom, a yes/no on a short drink date should probably be made fast and not agonised over.

Processes in many organisations are not geared to helping speed. Mostly they are geared to minimising risk. And while risk mitigation is a consideration an error of omission is many times a more serious error. 

One example is how Netflix simplified the expense policy for the goals of speed and simplicity.

“…

  • Our policy for travel, entertainment, gifts, and other expenses is 5 words long: “act in Netflix’s best interest.”

  • Our vacation policy is “take vacation.” We don’t have any rules or forms around how many weeks per year. Frankly, we intermix work and personal time quite a bit, doing email at odd hours, taking off a weekday afternoon, etc. Our leaders make sure they set good examples by taking vacations, often coming back with fresh ideas, and encourage the rest of the team to do the same.

  • Our parental leave policy is: “take care of your baby and yourself.” New parents generally take 4-8 months.

…”

A complicated expense policy is mostly there to try and mitigate risk rather than increase the time and productivity of its people.

Small organisations mostly do not bother with an expense policy and rely on trust and common sense.

I find this a telling observation. Small teams and small organisations can rely on trust and knowing. Big organisations lose that ability and rely on “policy”. 

It’s false reassurance. Policy won’t save you, if you don’t have the trust of people.

If you understand yourself enough to know what frustrates you and how much you like speed or not, this can set you up for the type of work and creative environments you should try and find. Perhaps that’s why hubs like around San Francisco are full of people who think like this.

There is so much about life which is due to uncontrollable chance factors or factors which may as well be chance. Again, if you understand or accept that view that about life then that may weigh on how you make decisions and view of risk.

When creating theatre, I think it does say something about the management of people and size of team that can be speedily managed or not.

If you are in the mode of creating a business, you might want to spare some thoughts to the culture you want to be developing and whether speed will be one of your advantages and if speed is part of your advantage, how to keep it.

Links:

Netflix Culture, policies and explantions

Interview with John Collison

The 1997 Amazon letter about decisions

Marc Andreessen Interview, productivity, outcomes vs process

Famous for essays decades old, more recently famous for his “Let’s Build” essay and generally famous for one of the most successful VC companies in the world, Andreessen gives an interview with Sriram Krishnan.

Out of many thoughtful points I’d highlight two.

-Personal productivity and the unstructured model vs the structured model.

-Process  (inputs) vs Outcome (OKRs/metrics) models

On productivity 

Andreessen moves from an unstructured model - that he blogged on previously (see below) - where he argues for trying to never put anything in the calendar…. To a very structured model that he articulates in the interview and highlights the pro/cons to both. It’s a 180 change in model - worthy of a hedge fund manager reversing his trade.

A highlight of the structured model (or his one but others are similar)  is that everything goes on the calendar - and you have to calendar “free” and “open/thinking time” and protect it.

Also worth looking at is Paul Graham on these areas. His 2006 blog still relevant on how insiders/outsiders and productivity can work.

As an aside, it’s why I remain suspicious of any claims to one “correct” way of thinking about personal productivity. Marc is extremely successful and has used model that are 180 degrees different.

On outcomes vs process

There are broadly two schools of thought. 

One which emphasises metrics... Only items that can be measured can be managed… and using KPIs (key performance indicators) and OKRs (Objectives and Key Results).

The other emphasis processes and inputs as important and outcomes come out of that.

Poker (and by extension investing or enterprise that has a decent mix of chance/random/luck as well as skill, and further it’s hard to know what exact mix causes an outcome) is suited to input and process. 

Sure you can measure your win/loss but it only improves via the process.

VC investing has a decent dose of luck and long horizons, say 10 years is common, which makes it suitable to the process method and Marc mentions this and his emphasis on process.

Endeavours which have very low random chance elements may be more suitable to OKR management - and say the lean type manufacturing processes (although lean itself has a lot of focus on process, it also has a big part on measurement).

As a final code... On let’s build... he would build in the areas of healthcare, education and housing.

Interview here: https://www.theobservereffect.org/marc.html

On Let’s Build:  https://a16z.com/2020/04/18/its-time-to-build/

Previously on productivity: https://pmarchive.com/guide_to_personal_productivity.html

Paul Graham on being marginal, inappropriate and outsider: http://www.paulgraham.com/marginal.html

Annie Duke on poker / process (also see Michael Maboussin). https://www.annieduke.com/

http://michaelmauboussin.com/index.html

What mindsets for investing markets can help with COVID thinking

What Markets can teach us

Markets are humbling.

As an intelligent - even extremely intelligent - young analyst. No matter how good she is. There will be decisions she misjudges. 

There are many uncertainties in markets and as I’ve referred to in my aphorisms - and others - one of the only certainties are the uncertainties.

The mental mindset to deal with those uncertainties and still make decisions - that have great weight as measures in millions or billions of dollars - takes training. By the time a young person forms into an adult much of that mindset may already be settled although more can be trained and the mindset can be continually worked upon.

This resilience or even antifragility (where you thrive on the uncertainty)  to deal with this in typical financial markets turns out to be useful for COVID.

There are uncertainties with COVID, tail (small but with large effects) risks, but decisions have to be made and may turn out to be wrong. Yet, you will have to make them.

Many analysts turn out not to be cut out for markets and investing as the strain on the mental mindset is too much. Unsurprisingly, COVID has caused strain on the mental health of many I know but there are lessons to be learnt for dealing with such risks.

  • Rely and assess the data. (see previous thoughts on forecasting and decision making).

  • Change mind if needed and reassess.

  • Don’t let the weight of the decision damage you.

  • You can control, what you can control.

  • What you can not control - you have to make peace with - as it is out of your control.


The same can be said for living with many aspects of special needs (disability) or other circumstances…

Here’s a piece on finding insights in the ordinary or even “boring” from travels with autism: Mindfulness and trains and here on what do you “see” when travelling on trains and buses

My book of aphorisms

Previous blogs on forecasting and decision making

Cliff Asness, Death of Value Investing

Cliff Asness (billionaire systematic quant based fund manager/investors) defends systematic value investing taking on two arguments, amongst a few:

-Value investing is too well known a strategic and so it’s now efficiently priced 

-Accounting metrics used by these strategies don’t reflect “value” - mostly as companies now own intangible assets both on balance sheet 

and off balance sheet (eg human capital) 

Asness does this by looking at different slices of the market:

-Value within industries 

-The market excluding certain industry sectors 

-The market excluding mega-cap size (largest companies) 

Asness seems to argue that an important reason why this type of strategy works over time is the behaviour of humans - then tendency of humans to over/under react. (I would note practitioners still hotly argue over why this strategy has worked over time and why there are periods - like recent years when it fails) He argues:

“...Besides just an inherent discomfort with randomness, part of the issue is confusion about why value works at all. It does not depend on getting big events or trends right. It does not depend on having perfect accounting information.

   Certainly, it does not require a lack of massive technological change over time. No matter what the situation, it simply needs investors to net overreact. Companies that are cheap need to tend to be a bit too cheap for whatever set of facts exists at that time, and expensive companies need to tend to be a bit too expensive.

   For instance, it’s OK if there’s more monopoly power for a few firms today than before (or any other thing being different this time), as long as humans will still tend to overdo estimates of how powerful and long-lasting those monopolies will be, and vice versa for cheap stocks that lack these advantages. We see no evidence that humans are now much more rational and less error-prone than they used to be.

 Furthermore, the systematic version of value almost always relies on extreme diversification. Therefore, stories that apply to a handful of stocks start out unlikely to be driving the overall factor performance or the cheapness of the factor we see today. But that is exactly what we need to prove or disprove below…”

The results are very much worth pondering.  

Now many market participants end up with the view that well traded and contested markets (liquid markets as practitioners say) are mostly efficient, much of the time.  But the flip side is that occasionally they are not efficient - or properly priced - and there may be liquidity, behaviour, structural and regulator reasons for this. 

This view is in a way behind the saying “if the price looks too good to be true, it probably is”

A properly contested market has fairly efficient prices.  And so too low a price must have a false (or maybe illegal factor) behind it or be false itself. The mispricing doesn’t hand around long otherwise. 

It’s also a force behind the rise in “passive” investing where investors and savers simply buy a large diversified index of companies and benefit from the “market” rate of return in that asset.  It’s typically the advice Warren Buffet gives for individual investors. He advises to buy america: (Ie a S&P 500 tracker index fund, and a little cash).  If you don’t have time to professional dedicate hours a week at thinking about investing you are unlikely to beat the market and even then many professionals don’t beat the market either. 

Back to Asness. He’s a very smart man with a whole team of super smart quantitative researchers along side him.This discussion on value has been noted by many investment people and is a known phenomena. This makes it intriguing as the more a feature such as “death of value” because established consensus - then if there is a behavioural element to the strategy - and it’s quite a big IF - then the greater a chance it may become true. Huh. ...  Second - third order and beyond thinking….

A link to Cliff Asness’ paper: Is Value Investing Dead.

Here’s an item on what the mental mindset for ceiling with uncertainty of COVID can teach you.


Taboo Cognition, Tetlock

From Philip Tetlock (2003) paper on Taboo Cognition: Thinking the unthinkable: sacred values and taboo cognitions.

Many people insist that their commitments to certainvalues (e.g. love, honor, justice) are absolute and inviol-able – in effect, sacred. They treat the mere thought oftrading off sacred values against secular ones (such as money) as transparently outrageous – in effect, taboo. Economists insist, however, that in a world of scarce resources, taboo trade-offs are unavoidable. Researchs hows that, although people do respond with moraloutrage to taboo trade-offs, they often acquiesce whensecular violations of sacred values are rhetorically reframed as routine or tragic trade-offs. The results reveal the peculiar character of moral boundaries onwhat is thinkable, alternately punitively rigid and forgivingly flexible.

This article summarizes an emerging body of research that explores how people cope – cognitively and emotionally –with a fundamental contradiction of social life. The contradiction can take diverse forms but its canonicalform can be stated simply.

On the one hand, as economistsfrequently remind us, we live in a world of scarce resources in which, like it or not, everything must ultimately take onan implicit or explicit price. Indeed, this austere insight prompted Oscar Wilde to define an economist as someonewho knows the price of everything and the value ofnothing.

On the other hand, sociological observers pointout that people often insist with apparently great conviction that certain commitments and relationships aresacred and that even to contemplate trade-offs with the secular values of money or convenience is anathema. In the social world inhabited by most readers of this journal, to be caught calculating the opportunity costs of one’s family or professional integrity or loyalty to one’s country is to reveal that one ‘just does not get it’ – that one simply does not understand what it means to participate in these rule-governed forms of social life in the roles of parent/spouse, scientist or citizen.

When economic necessity collides with cultural-identityand moral-religious imperatives, and in the modern world such collisions are common, the resulting dissonance can be excruciating.

Finite resources sometimes require placing at least implicit dollar valuations on a host of things that society at large, or vocal ideological sub-cultures, adamantly declare non-fungible: human life (what price access to medical care?), justice (what price access to legal representation?), preserving natural environments (what price endangered species?), and civilliberties and rights (can ethnic – religious profiling toidentify terrorists be justified on Bayesian and cost –benefit grounds?).

This article explores these issues in two sections. The first section offers a working definition ofsacred values and a set of hypotheses concerning howpeople cope with secular encroachments on such values. The second section sketches the principal lines of empiricalwork bearing on these hypotheses.

Conceptual backdrop

Political philosophers – from Aristotle to Marx and Nietzsche – have long speculated that citizens are morelikely to do what they are supposed to do if they believe themoral codes that regulate their lives are not arbitrarysocial constructions but rather are anchored in bedrock values that transcend the whims of mere mortals. ‘Don’t do x because I say so’ has less impact than ‘don’t do x because God says so’. By the middle of the 20th century, prominent anthropologists and sociologists had made the complementary observation that, although there is vast variation inwhat groups hold sacred, sacredness seems to qualify as afunctional universal across societies, both primitive and modern, and that moral communities erect a variety of psychological and institutional barriers to insulate sacredvalues from secular contamination.To jumpstart social-cognitive research on this topic,T etlocket al. defined sacred values as those values that a moral community treats as possessing transcendental significance that precludes comparisons, trade-offs, orindeed any mingling with secular values. Of course, the policy a community proclaims towards a sacred valuerepresents an expressed, not a revealed, preference. Our actual choices may belie our high-sounding proclamations that we have assigned infinite weight to the sacred value.

Tetlock et al. advanced a sacred value protectionmodel (SVPM) that asserted that, when sacred valuescome under secular assault, people struggle to protecttheir private selves and public identities from moral contamination by the impure thoughts and deeds impliedin the taboo proposals. The SVPM can be captured in three interrelated sets of propositions: moral-outrage hypotheses, moral-cleansing hypotheses, and reality-constraint hypotheses.

… to conclude:

…Intuitive theologians are suspicious, and unapologetically so, of the classic Enlightenment values of open-minded inquiry and free markets. Opportunity costs be damned, some trade-offs should never be proposed, some statistical truths never used, and some lines of causal/counterfactual inquiry never pursued.

More available here and Tetlock’s site here.

A blog on his Superforecasting ideas here and putting the ideas into practise on judging success of biopharma drugs here.