#55 - The less-is-more effect and the curse of 'indicatorism'

Plus: Why stress every once in a while is good

Hello, dear readers! Welcome to issue #55 of Curiosity > Certainty, my weekly download of thoughts on how to think better! 👏

Earlier this week, my cellular service provider bailed on me. They deactivated my account under the false assumption that my bill was unpaid. It was a system error by their own admission but to rectify it they had to follow protocol—something that cost me an entire day.

As luck would have it, it was on that very day that I had to travel an hour one way to meet a friend who was helping me with a work thing. I could not afford to miss this meeting. So off I went, armed with nothing but my terrible sense of direction and a couple of landmarks my friend had told me to look out for.

Before I share with you the rest of my solo adventure, let me share something worth thinking about.

The downside of this system error from my cellular service provider was shared asymmetrically. My monthly bill was all of 234 rupees. That’s 3 American dollars. The prospect of losing a loyal customer was 36 dollars a year for them! But the price I had to pay for being cut off from cellular data was an order of magnitude higher. I was willing to pay at least 10 times my monthly bill to make it in time for my meeting. (I would have paid Uber that.)

How could there such an asymmetry for a basic utility like cellular service? In there, friends, is the seed of the future. In the future, utility services will become free. Your cellular service provider, your broadband provider will offer you services for free. Already, Google and Facebook do that. The deflationary costs of technology will make it possible. This thought I heard echoed by Kunal Shah, founder of Cred, on The Knowledge Project podcast. He believes “All the businesses that are providing utility are losing gross margins to the point of becoming zero” and that the next SaaS company will offers it tools for free and charge for value-added services and thereby disrupt traditional utility service providers.

That sounds like the end of rent-seeking.

Coming back to my Christopher Columbus trip, thankfully I avoided his fate and landed on my two feet at my friend’s door. I have no idea how I managed, certainly all the more surprising with my nose for losing my way. I could only ascribe my success to the stressor of what was at stake. I had to make it and that sharpened my attention.

This is a case of what Nassim Taleb would describe as ‘hormesis’—the exposure to intermittent stress to trigger an adaptive response. And this is what leads to antifragility. Okay, it was just a 20-kilometer trip and I’ll rein myself in right away. But is it worth adding that my cellular service returned on my way back and I promptly missed my exit twice on the highway because I wasn’t paying attention?

The sediment of my experience is this: I have now resolved to do a No Maps trip once every month. What doesn’t kill you makes you stronger.

Indicatorism

Everything that can be counted doesn’t count, and everything that counts cannot be counted.

You can count how much you make at a job but not how quickly you learn. You can count the number of bedrooms but not the architecture of the place. You can count the comments to your post but not the difference your writing made to others. 

What can be counted tends to appear urgent, and what cannot be counted tends to be undervalued. But it is important to spend time on things that count, whether or not they can be counted. 

Big data is a classic case of what you can count is all that counts. Faced with data, we tend to do things that make it look better, regardless of what we really want to improve. Social products are judged on their DAUs and MAUs but what if the user base isn’t ready to pay? What will you do with all these active users? You know what Reddit’s ARPU is? 

Scientists are evaluated on how many research papers they publish and how many citations those papers accrue. Yet, by the same yardstick, Richard Feynman would be poor. But dare anyone not count Feynman amongst the giants of physics.

The phrase ‘numbers speak for themselves’ is a dangerous one. It presumes the numbers capture the essence of the thing being measured. 

There’s a term for this: indicatorism. Reducing the measurement of complex phenomena to uni-dimensional indicators. 

How do you face indicatorism in your work? And how do you practice it?

Built a bridge to get home only to end up living on it

Sometimes we end up living on the bridge we built to get us somewhere else. We take short-term decisions that create problems for us in the long-term. While deciding, we think we can manage the future but we end up having nowhere to go.

This is happening at an unprecedented scale today. Countries are investing heavily in domestic natural gas production and distribution to meet their energy demand in the aftermath of the Ukraine invasion that has stoked fears about an energy crisis.

So, countries are looking to swap Russian energy with domestic energy. You may wonder what the problem is since it’s just a swap. Not quite.

Gas is the bridge energy source. It is supposed to help the world make the transition from coal to renewable energy. It also happens to be a capital-intensive industry. What happens when countries make a capital-intensive energy source a transition plan? They’re likely to continue using it to justify costs, which in turn delays the transition to renewable.

Just like gas is the bridge energy source, discounts are the bridge revenue source and resource-sharing can be the bridge staffing source. And most of us have experience of a transition plan that becomes the plan. 

It’s the third quarter and you’ve fallen behind your annual target, so you start offering discounts. This turns up the trickle, pushes your business up. Next year, the same thing. And the year after too. Soon, you’re throwing discounts all year round. As the Stoa newsletter says, “you’re creating an expectation of future discounting.” You thought you were just crossing the bridge, but you’re now living on it. 

A hiring crunch may trigger internal resource-sharing just to keep your head above water. You’ve now managed to eke out 30% time of a high-value sales rep and you get so comfortable leaning in that you delay hiring and training someone permanent. Until one fine day this split resource quits and you’ve no transition plan. You’re standing on a burning bridge.

Bridge-building feels warranted as it is a response to a fresh urgency. But it also offers a false sense of security. In our rush, we forget that our main objective is not to build a bridge. It is to get to our destination. 

What decisions are you taking today that are pulling you farther away from your goals?

Less is more and the perils of bundling without thinking

When asked to value a set of items without comparing it with anything else, our brain tends to average instead of add. So, a set is more valuable if its average is better. Doesn’t matter if its combined value is less. This is called the less-is-more effect. We are willing to pay more for less. Sometimes, a lot more.

Here’s how you can test it. 

Imagine a dinner set for you on clearance sale. 10 each of dinner plates, quarter plates, dessert bowls, cups, and saucers. Half or so of the cups and saucers are broken.

There’s the same dinner set on sale, minus all cups or saucers, broken or not.

When shown side by side, you are likely to value the first set more than the second. Makes sense, right? The first has everything that the second does, plus more.

When shown separately, you’re going to value the second set significantly more than the first even though it has fewer items.

Wait! What? Don’t believe it?

Repeat this test with FIFA player cards, wine gift sets, or product bundles. The result’s the same.

I’ve already given you the reason for less is more. Here’s what it means for you.

No one wants broken china. But some don’t even want the good china if the broken stuff comes with it. So if you bundle something of obviously lower value than the rest of the pack, that’s going to bring the value of the pack down.

But that doesn’t mean you should never bundle. 

Bundle if price-sensitive customers are your target. They may not care that much about quality. They’ve come to you because it is cheaper than buying things alone. And expect them to keep looking for a bargain elsewhere. 

But understand that by bundling you may be shooing away those who are willing to pay a premium for quality. They are willing to pay extra for the top stuff. They know that you wouldn’t bother bundling unless you’ve inventory that you can’t sell on its own. If you want them, throw away the broken china for all they care.

***

Thank you, dear reader, for adding Curiosity > Certainty to your inbox. I’ve been thinking about how my LinkedIn writing (I post a few short pieces and videos every week) has changed my style. I won’t prime you by telling you exactly what my fears are, so I would love it if you let me know how you find my style in this social-media age of digital writing. Stay well!