Saturday, January 23, 2016

Understanding evolution-zebra article today

Some biologists today published a study on why they think zebra stripes are not for camoflage, etc. They do not seem to understand evolution quite right.

The winner in evolution transmits all their characteristics to the offspring. But  you can't say that the characteristic (e.g. stripes) was the cause of the individual being a winner.

A particular human being might be a survivor in a difficult situation because of their excellent intelligence. They may have a mole on their right chin, or have a hairy back, etc. All these characteristics will be passed on to their progeny; but it is not because of their hairy back or the mole on their right chin that they are a winner.

Or instead of intelligence, it might be just luck; maybe the individual just hid in a cave while the rest of the pack was eaten by a predator. Since this individual now reproduces, all his characteristics will be transmitted to his offspring.

The characteristics you see in a species like a zebra are just that; they are not there because somehow that characteristic lead the species to win out.

Even for sexual selection this is the same. The characteristic is not a cause of victory; it is a by product of already being victorious.

The same intelligent human being might be able to get more mates; but the females are not selecting the individual for their mole on the right chin or his hairy back.

This is a common problem I see in evolution related publications; essentially they do not get the causality right. The causes of why an individual survives are not known; the characteristics you see in an individual are the effects of them being winners.


Friday, December 25, 2015

Fools in Medicine

The issue of removing life-support to brain dead individuals comes up in the news quite often. The families normally want to give more time; but the expert doctors want to turn the thing off, probably to save costs, and let the patient die.

‘Brain dead’ son enjoys Xmas after dad armed with gun refuses to let medics end his life'

This is a major problem when medicine becomes a know-it-all cult, as it is in the US. The medics will not accept their own mistakes; and this story which fortunately has a happy ending is often times not even out in the press; because the medics are able to sell their "expert opinion" to the public. Often this is with social pressure-several of them will be together when taking this decision; so the family members think that they have really some knowledge here. Unfortunately, they are being lied too with group pressure.

Keep this in mind when someone goes into coma next time, and if need be, move them to a new country rather than a country where medics have more control over a patient than their own family members.


Wednesday, December 23, 2015

Probability fudging-drug companies with too many vaccinations, airplanes safer than cars

In this post I cover some examples of probability fudging which goes on around us daily. The basic tenet of this post is:
When probabilities of two things are low (less than 1%), the comparison between these two things loses is a property of statistical distributions. If something is very rare, and something else is very very rare, it is difficult to compare them. You don't have much confidence in drawing conclusions.

HPV and rare disease Vaccinations

There is a lot of talk about Human Papillomavirus (HPV) vaccinations. Kids, especially girls, between the age of 10 to 15 years are recommended to get this vaccine. Let us look at the data, published by CDC here.

There are 79 Millions Americans (total population of about 300 Million) affected with HPV. There are 12 Million cases of new infections per year. Cancers attributed to HPV are 27000, of which 18000 are girls, the rest of 9000 being boys.

Since 1 in 4 Americans has the virus already, and 12 million get it every year, the virus itself can't be that bad. This is a classic case of measuring too much-if common bacteria presented in the mouth are measured, surefly 1 in 4 have some particular "infection"...most Americans get on with their lives just fine, and HPV infection, even if they don't know about it, doesn't seem to be a big deal in everyday life. From this data, it is more common than the common cold virus-and you begin to wonder how (and why) they collected this data at the first place. But let's trust the data for a moment anyway.

The cases where you have severe effects (cancers) are interesting to us, 27000. It is a large number, but looking at the overall population of HPV infected people (79 Million), it is a very small percentage, about 0.0034%.   Only 3 in 10000 people are getting cancers attributable to HPV.

The pharma companies say we can eliminate this tiny percentage of people getting cancers by injecting them with the HPV vaccine. The side effects of thee vaccine appear on the same page: Out of 67 million doses of vaccine, 25000 people reported some side effects, and 2000 of these were serious. The serious side effects are about 0.00025%, or about 0.25 in 10000. We must remember that many people may not report a problem even if their child has some side effects, so this number 25000 is likely to go up.

At first instance, it will look like the benefit of the vaccine, eliminating 3 in 10000 cancers, is about 10 times better than the serious side effects of the vaccine (0.25 in 10000). But these are very small percentages, do we have good reliability of such measurements? No. The confidence level at these probabilities is very low, and a vaccine needs to be at least a 100 times effective (than non vaccine) for it to be not drowned in statistical error.

If the disease is rare, like this HPV-cancer, does it make sense to vaccinate at all? Obviously what's rare and not rare is subjective, but to me, a disease which will going to happen to 3 in 10000 is quite rare, and we should not hurry to vaccinate kids against it. Couple that with the problem with this specific case where there's no clear indication that the HPV is causing the cancer (they are confusing correlation with causality, and assuming that the HPV vaccine with prevent cancers 30 years from now, which is very speculative an assumption) and you see that HPV should not be a mandatory vaccine.

When probabilities are very low, the right distribution to look at is the 1-x distribution. That is the statistical trickery these guys are doing to convince us of the wonderful effects of the vaccine. If x is small, less than 0.1% (1 in 1000), you must evaluate the risk of intervention causing more damage then the disease itself. Unless you have clear data that this does not happen, don't put vaccines (or other procedures)

Let us look at the 1-x distribution of the same data.

99.9964% will not develop a cancer related to HPV if they are not vaccinated.
99.99975% will develop a serious side effect if given a vaccine for HPV.

Everybody in their right mind can see that these are comparable numbers, and we do not need to vaccinate kids against HPV, because the risk of side effects is the in the same ball park as the benefit of taking the vaccine!

By focusing on the "x" distribution, the data is magnified; but in reality, the real distribution of interest is the 1-x, which is a stable distribution, and doesn't change much by vaccinating our children.

To make this more clear, let us look at other examples of daily life, where the 1-x distribution should be looked at, not the distribution of x.

Airplane and Car driving safety

Airplanes are safe, driving in cars is safe. Most people know this, and will take a plane or car ride from a place to another without thinking about safety-they will only worry about costs and the conveniences and inconveniences when comparing the two. However, you have all sorts of bad statisticians comparing airplane safety to car safety, and concluding that airplanes are safer (or unsafer) than driving. The error there is that the 1-x is the real distribution of interest: the probability of survival. That is maybe 99.95% over 10 years of car driving  to 99.99% for plane riding, and those two are similar, dont you think? One thing is 99.99% safe, the other is 99.95% safe...we can agree that they are both quite safe. Noone thought that planes are significantly safer or unsafer than cars. Both are safe, the 1-x is the real distribution.

When the benefits are doubtful, as is the case for HPV vaccines (that's why they are banned in Europe, a continent not exactly stupid), it gets even worse; you are putting unnecessary risk for these kids in vaccinating them.

But from statistics alone you can see that pharma companies are comparing the wrong distribution to sell their drugs.


Thursday, December 17, 2015

On allowing mergers of big companies-they should never be approved!

Recently Dow and Dupont signed an agreement to merge.
Big companies merge all the time in all countries. In almost all cases, this is bad for the country. Here's how to see this.

The most common argument used by companies to get approval from the Government (FTC, FDA, etc.) is that a larger company will be better scale, and economies of scale will lead to lower costs, which they will pass along to the customer in the form of lower prices.

They are telling half of the story right. The economies of scale will work to reduce costs, but they are not going to pass along the cost savings to the customer or the consumers! They will just keep the extra profit themselves.

The price of something is decided by the market demand. If a company is able to lower costs, it will keep the extra profit to itself. It will lower prices only when 1) there is competition, and/or 2) they believe that lower prices will lead to much larger volume, leading to  the net dollar value of the revenue (pricexvolume) being much larger than before. Since noone can be sure that the volume will increase on lowering prices, the safest bet is to keep prices; and that means they will just keep the extra cost savings to themselves, in the ideal case. Only a foolish businessman passes along their extra cost savings to the customers; they intelligent one just keeps it himself!

What is more likely to happen when companies merge is that they will reduce competition, and therefore in reality increase prices for the consumers. It is like collusion; and only competition lowers prices. The larger the companies, the less the competition; and the more chances they have to collude and raise prices (easier to collude when there are 2 to 3 actors than when there are 10 to 20). Mergers almost always will result in higher prices for the consumers. They should never be approved.

The only exception where they can be approved are when the product is international-e.g. crude oil, copper, etc. Since there are many big competitors in other countries, it makes sense for commodities which are easily shippable worldwide to have large players at home as well. But this should be done only if we can buy foreign goods easily. In almost all cases, this is not true; therefore, mergers in general are bad for the country's consumers.

But here I just wanted to point out the fallacy of the argument of Economies of Scale - Lower Costs-Lower is simply Economies of Scale and Lower Costs, but not Lower Prices for the consumers.

Plus taking out a competitor lowers competition, and therefore increases prices for the consumers.

Next time a trade body like the FDA or FTC of your country approves a merger, tell them this! Almost all countries in the Americas, both North and South, have a problem in the Telecom and Pharma Sector. The Telecom monopolies are really horrible for the country's consumer. This is why Carlos Slim is so rich-he has little competition, and Mexico has given him a license to screw over all Mexicans by having little or no competition.

Competition and presence of many actors lowers prices for consumers. Mergers do exactly the opposite.

This is also related to whose side the Government must take-the consumer or the producer? It must always be the consumer. Here's the blog post which explains this.


On putting your own people as suppliers, your distributors and customers, etc. to lower costs

A big company like Amazon sometimes gets into crazy ventures to "lower costs". They believe they can do everything, and therefore cut out all the profits and sales which they have to give to other companies. Sounds like  a groovy train of free profits, right?This is because of a poor understanding of Economics. Here's what promoted me to write this piece.
Amazon is in talks to lease 20 cargo planes to build its own overnight air operations

The summary is that Amazon wants to eliminate Fedex and UPS eventually by setting up it's own distribution and logistical network.

What's wrong? Why doesn't Amazon go even further and plant it's own wheat, that way it can feed it workers cheaply, and therefore lower costs further? Or build houses and then make the workers live in them, and therefore keep the "rent" these workers give as it's own profit?

This can't work because your capital is finite. Whatever you put in a new venture, you take away from your existing venture. In other words, if Amazon will lease these planes to make deliveries, it will necessarily do it at the expense of it's core retail operations (warehouses, inventory of items, etc). Since capital is not infinite, by putting your capital in new ventures, you are always taking away capital from your existing ones. Since the existing ones are your competitive advantage, you are almost always making a mistake.

This was explained well by Adam Smith. Wholesalers can't become retailers just because they are envious of them. They will need to take away the capital they have in wholesale goods to supply the retailers, and that means that if they put retail stores, their wholesale operations necessarily shrink, or are reduced in size (grow at a smaller rate).

You normally want to allocate more capital to your core competency, and move to newer ventures only if you fear that you have saturated out your core businesses. I doubt this is the case even for Amazon.

A few years ago there was a company called Molycorp (it went bankrupt) which was extracting rare earth minerals from Nevada. Since the allocation of capital was never clear to these people, they went ahead and bought out their own customer (with their capital), which was a magnet maker in Canada (rare earth magnets were made by this company, and Molycorp supplied them with the raw materials, the rare earth minerals). They thought they could keep the profit of the magnet maker too! Well, they took away capital from their core operation of extracting rare earth minerals from the ground, and note that you take away capital not just in the form of money, but by diverting the attention of Management on another business, or sending your employees to the new business, etc. So instead of one problem, they had two problems now. Sure enough, the company couldn't handle all this; and they went bankrupt in a a couple of years.

So remember this next time someone wants to cut costs or increase profits by buying their own suppliers or customers; they are in almost all cases making a terrible mistake. The part of capital allocation and the that capital is finite is often ignored by most businessmen and economists; when they are going into new ventures, means necessarily less capital for existing ones.

Amazon has as good a chance in building a successful logistics and distribution network as Fedex has of building an online retailer. Both are moving away from their core-competency; and in doing so, probably making a mistake, and will cause losses of this capital.