Category Archives: work

Pound cost averaging: An update

Back in June 2016 I wrote about how investors might learn from the endurance runner who modifies their effort according to the terrain. Since then I have been looking at what sort of numbers a strategy like this might have returned in 2016.

To recap, assume I decide to invest around £1200 a year. I decide that I’m going to average this at £100 per month, but if the market is falling I will invest more (to take advantage of lower prices) and if the market is rising I will invest less (because my money will buy less stock).

I took the FTSE100 index as a guide, establishing the index position on the first of each month (or as close to as possible). I determined the rise or fall in the preceding month. For example, on 1st Jan 2016 the index was 6903.4, on 1st Feb it was 6060.1, just 87.78% of the value. This meant I would invest £112.22 in February. I called this my ‘Modified PCA’ (Pound Cost Average). In February my £112.22 bought theoretical ‘shares’ which were tied to the FTSE100 index, so £6.06 per unit, giving me 18.52 units. I followed this pattern for the entire year and benchmarked it against a strategy which simply bought £100 worth of shares each month. As a control, I also looked at performance against a scenario where I had invested £1200 in one lump sum at the FTSE100 ‘share price’ in January (£6.90).

By the end of the year there had been only four months where the market fell from the previous month. My total expenditure on the Modified PCA was £1201.08 (assuming I didn’t add another amount in January 2017). I was surprised it was so close to the strict average. The effect of adjusting my effort meant that the value of the ‘shares’ I owned was now £1419.47, a healthy 9.63% return. By contrast, a strict normal PCA of £100 a month investment would have left me with £1423.45, a little more in absolute terms but the reduced buying power in a rising market meant a slightly lower return, 9.5%. Nevertheless, if I had just invested all £1200 in January 2016 I’d have made only £48.69, just 4.05%.

Of course, this is just based on my basic maths (easily my weakest subject) and assumes investing in the FTSE100 as a simple index rather than a specific fund, but it just shows that there is some real-world opportunity in taking a consistent and disciplined approach to monthly investment. Now if only I could apply that to my sub 3hr marathon project…

Raw data here (please do interrogate and correct me if wrong)

 

Coda
A Morningstar piece identifies that plain old PCA is only better than lump sum investing during falling markets. It’s a good summary of the potential but I still haven’t seen anyone using a modified PCA like mine and it and this Money Observer piece also make it clear, again, that regular investing penalises the investor with transactional fees.

Finally, my approach also falls into the Black Swan trap of using historic data to inform future investment decisions.

 

 

 

Listen less, observe more. Human-centred designers must ask deeper questions

One of the most oft-repeated tropes of human-centred design is that we must pay attention to a person’s needs. These needs are often said to be identified through the observation of past behaviour. In digital (whatever that means these days) this is typically through the gathering of usage data. Sit in any pitch or briefing and it won’t be long before someone starts talking about dwell times, form drop offs and so on an so forth. Often a well-meaning ‘user experience’ staffer will pipe up about the need to develop personas, and a marketeer will add “based on our segmentation of course!” “of course!” they reply. Data is incontrovertible.

Really, businesses don’t like anecdotes. They’re not keen on stories (even if the managers are consuming books on storytelling and the engineers are developing use cases), so they rely on the known knowns – how people are using their site or service. It’s this, they say which informs us how people will use our experiences in the future.

I’m unconvinced. Increasingly I find myself resisting the temptation to read much into past behaviour. The empirical psychologist in me knows that, to be a predictor of future behaviour, fellow researchers have come to some agreement that there really are quite strict conditions for this to be the case:

  • The behaviour has to occur rather often (i.e. it’s high frequency).
  • The prediction is most accurate if based on a short time frame.
  • The predicted situation must be a close match for the past situation that the observation was made from.
  • The behaviour must not have been influenced by negative or corrective feedback.
  • The person must be unchanged and, finally,
  • The person must be generally consistent with their behaviours.

That’s quite a set of experimental conditions to maintain. Consider this, if your customer bought from your site or interacted with your brand once before, can you honestly assume that they will meet all those conditions on their return visit? Even with high-traffic repeat visits I’d contend that there’s sufficient variance to make predictions at the very least, wobbly. Add in a timeline of a few weeks or months (like financial services sites, for example) and your prediction is looking essentially worthless.

Demographics are not behaviours
Quite apart from the predictive past performance within your own brand experience, what does this mean in terms of inferring behaviour from others’ actions? One of my bugbears is the regurgitation of segmentation and demographic-led personas. Passed on from media buying and market research these exhibit the classic failure of data vs. insight, that is they offer no illumination. As an identical twin who shares the same postcode, age, socio economic group and racial profile as my brother, the lazy marketeer assumes I have the same needs and behaviours as he. Though there is some cross-over, there is much that is also different and to paint with broad strokes is to miss the kind of detail in human-centred design that creates real breakthroughs. Repeat after me: demographics are not behaviours.

In 2016 where profiling and polling were shown to be so woefully ineffective at determining voter action (c.f. Brexit, Trump), isn’t it time we took a long hard look at the way in which we interrogate and model human behaviour? Fortunately some are doing this and we might look to important contexts like criminology, where they are identifying the desistance curve as offenders age and applying Bayes’s theorem to calculate offenders’ likely behaviour.

Will it rain today?
Where this leaves us is in the area of accuracy. Ultimately, as Rory has asserted in the past, analogous to our weather forecasting, we’re getting better at predicting short term behaviours but still a long way off high-fidelity predictions for weeks and months ahead. What’s helped Dare and other progressive human-centred design teams is looking at what are the stable traits of human behaviour and, furthermore, rigorously considering what is the relevance and integrity of data that forms the inputs of our predictions; we should never draw general conclusions from specific observations and it is this inductive reasoning that plagues our profession.

Nate Silver’s seminal ‘Signal and the Noise’ is undeniably popular and his models had much early success but criticisms begin to be levelled quite fairly when attempts are made to model personal and social behaviour not financial markets. I wonder if, dear reader, you’ve read Taleb’s “Black Swan“? (If you have I wonder if you read all of it? I’ve met few people that have and if you’re like me you found it’s autobiographical style impenetrable, obfuscating and bombastic. Even the Wikipedia summary suffers a similar fate) in short Taleb makes the same point, we care way too much about the inputs to our black box of analysis and truthfully understand very little of what’s going on in incredible complex systems. Taleb also points us at another user-centred design bear pit: the narrative fallacy. We construct user journeys, use cases and flows in narratives that serve to over emphasise what we think we know and bring with them all the confirmation bias of author and reader combined. How often do we still read that it’s important we design brilliant experiences that delight? You’ll see testimonials plastered on the walls of Customer Experience Officers’ offices and headline grabbing responses from frontline staff going above and beyond, and yet research has shown for some time that exceeding some expectations does no more for loyalty than a comprehensive approach to meeting most of them. But it’s just such a nice story isn’t it?

I don’t believe that the way human-centred designers unquestionably use the tools our industry have been using for the last 20-odd years gets us to great solutions.

I believe we need, like Khaneman did, to take the lessons from Taleb and stir in even more psychology, evolutionary psychology.

The answers are in our past, our prehistoric past
I’ve found comfort in developing an approach based on two seminal statements on consumer behaviour: The late David Ogilvy’s famous quote questioning the value of market research: “people don’t think how they feel, they don’t say what they think and they don’t do what they say.” and further Theodore Levitt’s “People don’t want to buy a quarter-inch drill, they want a quarter-inch hole“. I would go one step further than Levitt and suggest that they want to hang that shelf that their spouse has been hassling them about so they can unlock a little more affection. Our modern age skulls house stone age minds and, as far as I’m concerned, a ludicrously overlooked truth is that we are a species that was for a very very long time motivated by procreation, the next meal and the next opportunity to rest. These basic needs of simple satisfaction surely form the basis of our the vast majority of our motivations and when we understood the roots of our behaviour we begin to unlock some truly creative solutions to our clients’ problems (there’s a reason everyone’s talking about Lagom and Hygge, simple satisfaction is incredibly human). We don’t get there by asking our customers this stuff, we get there only through anthropology and ethnography level observations: facial coding, eye tracking, galvanic skin response, neuromarketing. I’ve yet to see a CV where a UXr tells me they’re fascinated in anthropology or they’re fluent in FACS taxonomy, when I do I’ll hire them.

Research and analysis like this doesn’t come cheap and it doesn’t come quickly but tools like iMotions and IBM Watson have the potential to do for behaviour modelling what supercomputers have done for weather forecasting. Interpretation by inquisitive and analytical strategists that are comfortable asking ‘5 whys‘, doing field observations and contextual inquiries will guide us far better than fire hosing strategy and Ux teams with web analytics. To be clear, I am not dismissive of the role of usage data, I simply insist that it augments a broader collection of data gathered from IRL observations and a contextual understanding of human behaviour.

Bury the cliches
Henry Ford never said he didn’t listen to customers (I happily correct anyone who regurgitates the Faster Horse quote), Schiller never said Apple don’t do customer research (rather they do deep ethnographic studies and are ferociously tracking observed behaviour). I’m not saying we won’t learn from customer behaviour but rather, in order to get us to innovative, creative human experiences and behaviour change we must go beyond a facile and shallow observation of customer segments. We must build intelligent teams, use tools and encourage methodologies that give us the time to build upon the evolutionary roots of human behaviour and, whilst doing so, accept that our view extends no further than the horizon, we are powerless to know if it will snow next Christmas.

In a future post I will explain why I believe an automated approach to predicting and ‘optimising’ human behaviour through so-called personalisation offered by web platforms is not helpful at advancing our online experiences.

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The unreasonable consumer

On the 1st April Kara Pernice wrote a satirical piece on the NN/g blog calling on the user-centred design community to switch to creating difficult designs, for the benefit of humanity. I’m sure it was a jolly April Fool for the NN/g to post such an about-turn but in truth there is much we could do to reduce our obsession with making things easier for customers,  listening to their every whim and generally ignoring the realities of human existence in our pursuit of the utopian user experience.

I’ve written and spoken several times about intentional friction. It’s something I passionately believe in. From the smallest poke-a-yoke to the intentional deployment of dark patterns, there is a place for cognitive – even dexterity challenges – in user experience (see William Peng’s post on sign ups) and to deny them is to apply flat earth thinking to our behaviours.

The unreasonable consumer

As these things often do, later I read a great post by Rubuss’ Mark McArthur-Christie on LinkedIn where he mused about a customer service issue many of us have experienced, the customer that is beyond help and satisfaction. It inspired some additional thinking around how we might categorise these personas:

  • The naive dogmatist – a customer who is convinced that there is only one way things should be, often formed of a collection of misunderstood information: consumer rights, archaic business structures or some previously used process. Most likely to say “I know you can give me a discount”, “I know my statutory rights…”
  • The intransigent utopian – a customer that believes that businesses should operate at a loss in order to fulfil every customer whim. Indoctrinated with the mantra that the ‘customer is always right’ and will not yield as they insist that any problem or issue is fixed in their favour regardless of the cost or implications to the business or, for that matter, other customers. Most likely to say “I want to be compensated for my phone calls and be sent a brand new product tomorrow, personally by the Chairman”
  • The confrontationist – Generally spoiling for a fight and actually enjoys the process of battling with front line staff, progressively picking off more senior members of the team until they get to speak to the biggest boss whereupon they’ll continue to shout and begins to sound a little deflated and resentful when solutions are offered. Most likely to say “I’m going to be putting this all on Tripadvisor” and “I have sent my complaint to the chief executive and am waiting outside for them in my car”

 

In user centred design we have to believe that the user is, by definition, a sacred cow. I’d contend that, although the entire herd are not for the abattoir,  we should at least consider some tactical ignorance. In my second piece on the subject, I will be exploring what it really means to listen to users and not resort to the tropes bandied around by a lazy community of precocious experts.

The Trip 2017: where next?

We’ll be off again in 2017. We’ll be going SW it seems. Take a look at this post (and the summary of our October 2016 homage to The Trip).

thetrip2016homage's avatarThe Trip: a 2016 homage

As the dust settles and the bright autumnal days descend into a more wintry gloaming, the only remedy is to start planning the sequel. It won’t be Italy, or Spain. As discussed in my earlier post, Italy is a less achievable facsimile. And Spain, the destination of the completed but un-aired third series, is entirely unknown.

It’s time to be brave. Original to a point but clearly derivative and domestic.

It’s an uncontroversial view to say that The Trip has a proven formula. Road trip + picturesque locations + fine restaurants and accommodation + a cultural (literary) thread. Surely that formula can be applied to any number of locations in the UK. It is not entirely subjective to say that the UK is blessed with beautiful landscapes, fine dining and a rich cultural narrative. It is perhaps also no coincidence to postulate that these things combine most happily in areas…

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Hipping Hall and The Angel at Hetton

It has been a feature of the hotels and accommodation up here that the central heating is cranked up to a level that would be banned as torture under the Geneva Convention. Still ravaged by sicknes…

Source: Hipping Hall and The Angel at Hetton

Holbeck Ghyll

and so we entered, met by a small man in a box room

Source: Holbeck Ghyll

Cartmel and Greta Hall

From now on The Trip gets a little truncated. I have never been good at maths but I know that six into four won’t go. Some divergence from canon is necessary. So today began at Bashall Eaves …

Source: Cartmel and Greta Hall

The Inn at Whitewell

With the best intentions of leaving at 40 minutes earlier, it will come of no surprise to any who know us well that we pulled away at 9.10am. Slipping with remarkable ease through the Surrey rush h…

Source: The Inn at Whitewell

The Trip: setting off

It’s not just me that writes stuff about me. Here’s my twin brother writing about something properly interesting that we’re doing next week.

thetrip2016homage's avatarThe Trip: a 2016 homage

I suppose the idea began the first time I saw The Trip, inasmuch as it started from an idle thought  along the lines of “I’d like to do that one day”. The first time I saw it was on its first airing in the UK, on BBC2, back in the autumn of 2010. Life was different then. Two years before I had my first child, four years before my second. Another series has taken Steve and Rob to Italy (2014) and, as I write, they are on location filming the third series in northern Spain.

From time to time it came back to me. The movie version on a transatlantic plane in 2011. The second series broadcast in Spring 2014. Passing mentions in interviews, podcasts and articles. A Children In Need sketch. A lingering memory of a particular impression that cried out to be retold or shared on…

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