The Business section of The Washington Post on Sunday, September 27, had four interesting articles about decision making.
Brian Fung discussed the new iPhone and the different ways to pay for it, including payment plans, leases, and traditional contracts (https://www.washingtonpost.com/news/the-switch/wp/2015/09/14/thinking-about-buying-a-new-iphone-read-this-first/). He identified the best plans for four different types of consumers: bargain hunters, early adopters, owners, and traditionalists.
Barry Ritzhold's column on investing (http://www.washingtonpost.com/business/get-there/never-buy-a-boat-and-other-rash-financial-advice/2015/09/25/b788db36-60a7-11e5-8e9e-dce8a2a2a679_story.html) covered financial advice (like "never buy a boat") and then discussed the importance of recognizing four key issues in any big decision: knowledge, costs, skill, and psychology. He proposed the following decision-making approach: (1) understand what you are getting into, (2) carefully consider all of the costs of ownership, (3) only buy what you can afford, and (4) make an intelligent decision about using your limited time and money.
Chico Harlan discussed the American Airlines-US Airways merger and how the combined firm is working hard to manage the risks associated with integrating their operations (http://www.washingtonpost.com/business/the-last-days-of-us-airways/2015/09/25/f5530686-60a6-11e5-8e9e-dce8a2a2a679_story.html). A key decision was retaining the larger reservations system used by American Airlines, which reduced the number of employees who had to learn a new system.
Finally, Michelle Singletary (http://www.washingtonpost.com/business/get-there/the-pope-has-left-dc-but-his-words-remain-we-must-help-the-poor/2015/09/25/c7b423c6-60a7-11e5-8e9e-dce8a2a2a679_story.html) wondered if the Americans who were inspired by Pope Francis will decide to contribute their time and talents to help the less fortunate and discussed the relevant priciples.
Tuesday, September 29, 2015
Wednesday, September 23, 2015
Traveling in Pennsylvania
Last weekend we used the Pennsylvania Turnpike for our drive to the Pittsburgh area. Because we were headed away from Philadelphia, we were surprised to see roadside emergency signs "warning" us about the visit by Pope Francis. At the Somerset service plaza, we found cards on every table reinforcing the message (see photo). The back of the card had advice about safe driving that would normally be relevant to a severe winter storm.
The Turnpike's website also had this "highway advisory" (the original was in ALL CAPS):
Although the Pope poses no threat, the traffic surrounding his visit will be disruptive, so the Pennsylvania Turnpike staff prepared a standard risk communication message that describes the potential problem, its extent (time and place), and what one can do to mitigate it.
The Turnpike's website also had this "highway advisory" (the original was in ALL CAPS):
To all travelers on the Pennsylvania turnpike Interstate 76, Interstate 276, and Interstate 476. Motorists are advised of the upcoming Pope visit in Philadelphia on September 26 and September 27, 2015. This event is expected to cause significant congestion around the Philadelphia region from the Reading interchange to the Delaware River bridge, and from the Pocono interchange to the mid-county interchange. For travelers not destined for Philadelphia during this time, find an alternate route.
Although the Pope poses no threat, the traffic surrounding his visit will be disruptive, so the Pennsylvania Turnpike staff prepared a standard risk communication message that describes the potential problem, its extent (time and place), and what one can do to mitigate it.
Wednesday, September 16, 2015
Making Laundry Detergent Safer
The Wall Street Journal reported that American manufacturers of laundry detergent packets (like Tide Pods) have agreed to a voluntary standard for the packaging of these packets.
According to the American Association of Poison Control Centers, in the United States, 7,184 children (age 5 and younger) were exposed to single-load laundry packets in the first seven months of 2015 (http://www.aapcc.org/alerts/laundry-detergent-packets/).
The WSJ article described the changes that the manufacturers will make (including tougher packaging and opaque containers).
It also quoted Nancy Cowles, the executive director of Kids in Danger, a nonprofit organization dedicated to protecting children by improving children’s product safety (http://www.kidsindanger.org/about-us/).
She raised an interesting question about risk monitoring: "We are talking absolute numbers-that's what we want to see a drop in. What's important is how many children are being injured, and not the rate of injuries relative to how much companies are selling."
What is the right measure of risk in this case: the number of children injured by laundry detergent packets, the number of injured children per household that uses laundry detergent packets, or the number of injured children per million laundry detergent packets sold?
In other areas, risks are measured per unit of activity: for instance, the European Aviation Safety Agency (EASA) 2013 Annual Safety Review reported both the number of fatal accidents per year and the rate per 10 million flights. Both numbers have been decreasing since 1994, but the rate varies dramatically around the world.
For the article, see http://www.wsj.com/articles/p-g-other-laundry-pod-makers-agree-to-new-safety-standard-1441397456?mod=rss_Business
According to the American Association of Poison Control Centers, in the United States, 7,184 children (age 5 and younger) were exposed to single-load laundry packets in the first seven months of 2015 (http://www.aapcc.org/alerts/laundry-detergent-packets/).
The WSJ article described the changes that the manufacturers will make (including tougher packaging and opaque containers).
It also quoted Nancy Cowles, the executive director of Kids in Danger, a nonprofit organization dedicated to protecting children by improving children’s product safety (http://www.kidsindanger.org/about-us/).
She raised an interesting question about risk monitoring: "We are talking absolute numbers-that's what we want to see a drop in. What's important is how many children are being injured, and not the rate of injuries relative to how much companies are selling."
What is the right measure of risk in this case: the number of children injured by laundry detergent packets, the number of injured children per household that uses laundry detergent packets, or the number of injured children per million laundry detergent packets sold?
In other areas, risks are measured per unit of activity: for instance, the European Aviation Safety Agency (EASA) 2013 Annual Safety Review reported both the number of fatal accidents per year and the rate per 10 million flights. Both numbers have been decreasing since 1994, but the rate varies dramatically around the world.
For the article, see http://www.wsj.com/articles/p-g-other-laundry-pod-makers-agree-to-new-safety-standard-1441397456?mod=rss_Business
Saturday, September 5, 2015
How to build better models with end-user modeling
Many decision-makers rely upon analysts to build models for them, and they get involved in a back-and-forth with the analyst who is supporting the decision-maker by evaluating and ranking alternatives using a mathematical model (like decision analysis or optimization). This iteration (called decision calculus by John Little) can waste a lot time.
In some situations, a better option is end-user modeling, in which the decision-maker builds the model. The approach is quantitative but not analytical, the style is quick and dirty, and the purpose is to gain insight into a decision or problem. (Tom Grossman and Stephen Powell introduced this style of modeling, which exploits the power of spreadsheets. Powell and Baker's textbook describes spreadsheet modeling in detail.)
The end-user modeling process, which accelerates the process of using models to understand a situation, has three steps: (1) plan the model (with the computer off); (2) program the model, and (3) craft the user interface.
For the planning stage, start by identifying the key relationships between the inputs and outputs, sketching the layout of a worksheet to calculate the outputs, and drawing the key charts and graphs that will provide the needed insight.
When programming, build the spreadsheet one section at a time, checking the each section works correctly, and using good spreadsheet programming techniques.
For the user interface, use color and formatting and comments to make it clear how to use the model (one can quickly forget after setting it down for awhile). Clearly identifying the inputs, parameters, calculations, and outputs is very helpful.
As Grossman stated, end-user modeling gives one "the ability to roughly compute the effects of a proposed change ('what-if' modeling)" and "the ability to obtain quick, rough insight on actions that are likely to improve the business."
For further reading:
Grossman, Tom, "End-User Modeling," OR/MS Today, October 1997. Link: http://lionhrtpub.com/orms/orms-10-97/IiE.html
Little, John D.C., “Models and managers: the concept of a decision calculus,” Management Science, Volume 16, Number 8, pages B-466-485, 1970. Link: http://pubsonline.informs.org/doi/abs/10.1287/mnsc.1040.0267
Powell, Stephen G. "The teachers' forum: From intelligent consumer to active modeler, two MBA success stories." Interfaces 27, no. 3 (1997): 88-98. Link: http://pubsonline.informs.org/doi/abs/10.1287/inte.27.3.88
Powell, Stephen G., and Kenneth R. Baker, The Art of Modeling with Spreadsheets, John Wiley & Sons, Inc., Hoboken, New Jersey, 2004. Link: http://www.wiley.com/WileyCDA/WileyTitle/productCd-EHEP002883.html
In some situations, a better option is end-user modeling, in which the decision-maker builds the model. The approach is quantitative but not analytical, the style is quick and dirty, and the purpose is to gain insight into a decision or problem. (Tom Grossman and Stephen Powell introduced this style of modeling, which exploits the power of spreadsheets. Powell and Baker's textbook describes spreadsheet modeling in detail.)
The end-user modeling process, which accelerates the process of using models to understand a situation, has three steps: (1) plan the model (with the computer off); (2) program the model, and (3) craft the user interface.
For the planning stage, start by identifying the key relationships between the inputs and outputs, sketching the layout of a worksheet to calculate the outputs, and drawing the key charts and graphs that will provide the needed insight.
When programming, build the spreadsheet one section at a time, checking the each section works correctly, and using good spreadsheet programming techniques.
For the user interface, use color and formatting and comments to make it clear how to use the model (one can quickly forget after setting it down for awhile). Clearly identifying the inputs, parameters, calculations, and outputs is very helpful.
As Grossman stated, end-user modeling gives one "the ability to roughly compute the effects of a proposed change ('what-if' modeling)" and "the ability to obtain quick, rough insight on actions that are likely to improve the business."
For further reading:
Grossman, Tom, "End-User Modeling," OR/MS Today, October 1997. Link: http://lionhrtpub.com/orms/orms-10-97/IiE.html
Little, John D.C., “Models and managers: the concept of a decision calculus,” Management Science, Volume 16, Number 8, pages B-466-485, 1970. Link: http://pubsonline.informs.org/doi/abs/10.1287/mnsc.1040.0267
Powell, Stephen G. "The teachers' forum: From intelligent consumer to active modeler, two MBA success stories." Interfaces 27, no. 3 (1997): 88-98. Link: http://pubsonline.informs.org/doi/abs/10.1287/inte.27.3.88
Powell, Stephen G., and Kenneth R. Baker, The Art of Modeling with Spreadsheets, John Wiley & Sons, Inc., Hoboken, New Jersey, 2004. Link: http://www.wiley.com/WileyCDA/WileyTitle/productCd-EHEP002883.html
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