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The Semmelweiss Reflex – Rejecting New Evidence Opposing Established Norms

The new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die, and a new generation grows up that is familiar with it.
Max Planck

Kurt Vonnegut called him “my hero.” His birth house is now a museum named for him. Many wrote about him, and last year, over 150 years after he died, there was a play about him in London. But Dr. Ignaz Semmelweiss did not enjoy this popularity when alive.

After earning his medical degree, Vienna General Hospital appointed him to their First Obstetrical Clinic in 1846. Made of 2 units, the 1st clinic, run by midwives, had a much lower mortality rate than the 2nd, operated by doctors. After much research, he suspected that doctors going from their cadaver lab directly to the maternity ward might have led to the transfer of “cadaverous particles” to maternity ward patients, as midwives in the 2nd clinic had no such contact with corpses. He suggested that doctors wash their hands. When they initiated that procedure in the first clinic, its mortality rates plummeted.

However, colleagues broadly mocked his hypothesis that only hygiene mattered. At the time, his theories lacked scientific explanation. That became possible after his death when Louis Pasteur and others developed the germ theory of disease.

Outraged by the apathy of his colleagues, he became dejected and drank heavily. He was committed to an insane asylum where guards beat him until his hand got gangrene, which quickly killed him.

The rejection of his observations was so severe that it came to be named the Semmelweiss Reflex, the affinity of people to cling to discredited beliefs.

I know something about that. I’ve taken my book to some big-name graduate schools. They won’t say it’s wrong. They just won’t read it. Thus, I’ve seen my paradigm-shifting observations undisputed but largely ignored. That reaction persists despite my undeniable mathematical evidence proving those previously held theorems false and incomplete.

At the lower left below, here’s an example homework problem for a current economics class that wants students to explain a “change in market equilibrium.”

Note the complete lack of data. Everything in the diagram is imaginary. Where is the information about the cars? Nonexistent. Oops.

Markets form with actual data, as shown in the lower right diagram. There, 18 electric car models for sale had points in Value Space (green spheres) describing their 1) Range, 2) Horsepower, and 3) Price, with matching points (red spheres) on the Demand Plane depicting their 3) Prices and 4) Quantities sold. There is no “equilibrium point,” as models enjoy “sustainable disequilibria” when prices exceed costs.

Unlike Dr. S, the rejection won’t drive me mad. But I am curious about the apathy.

And I wonder, as Semmelweiss did, who will wash their hands first?

#semmelweiss #hypernomics

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Position to Win by Finding Open Market Spaces

Hit ‘em where they ain’t.
Wee Willie Keeler

You may not have heard of Wee Willie Keeler, but he changed baseball.

With over 63 at-bats between each strikeout over his career, he could bunt any ball pitched to him. Because of him, baseball stopped allowing unlimited bunt fowls and made one with two strikes a strikeout. He hit .300 16 times and .400 once. His record of 206 singles in a season stood for over 100 years. When Joe DiMaggio set his 56-game National League hitting streak, he broke Keeler’s 45-game record. He used one of the largest bats in the league, weighing up to 46 ounces.

And he did it all despite his diminutive size of 5’ 4 1/2” and weighing just 140 pounds.

His famous adage of “hit ‘em where they ain’t” applies not only to batting but also to marketing new products. It makes little sense to try to copy a competitor and offer a virtually identical product for a lower price when one can offer the market a new item that it wants, doesn’t have, and can afford.

To do that, we’ll need to describe our markets thoroughly.

In the case below, we’ll start with a fully assembled dataset describing the USG purchases of air-to-surface glide bombs (brown) and missiles (blue) over the 20 years beginning in 1997 and ending in 2016.

Imagine we are trying to sell a new missile. What can we give the market that it doesn’t already have?

In (A), we plot the range of the missiles in the set on the horizontal axis and their prices on the vertical axis. Instantly, we discover a critical fact: a substantial gap in missile prices. The USG has purchased cheaper and more expensive devices; it stands to reason that they might buy a new missile within this space with the appropriate features. In the same plot, we see that a similar opening exists relative to the range of these devices.

Figure (B) offers the same kind of insight that (A) does while looking at a different independent variable, launch mass. While the price gap in (B) is the same as in (A), in this view, we discover a sizable gap in the market’s launch masses. By interpolation, given that it performs well, a new product with mass in this gap will likely find a market.

(C) finds that the market for Air-to-Surface missiles has Upper and Inner Demand Frontiers. If we wanted to build, say, a missile that could sell as many as 28K units for an average price of $300K over 20 years, we find (once we do regression analysis considering 1) mass, 2) speed, 3) range, and 4) quantities sold, and set the Values for those first three independent variables, not shown here) this market has a Product Demand Curve that forms for each item. With a slope of -0.208, it is analogous to an 86.6% learning curve.

Thus, if a supplier can demonstrate a steeper learning curve than that throughout the program, they have the potential to meet their 28K unit limit goal at $300K along the Upper Demand Frontier.

#hypernomics #pricetowin #gapanalysis

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Solving the 1st Half of the Problem to Get to the 2nd

A problem well stated is a problem half-solved.
Charles F. Kettering

A few months ago, I wrote about the ill-fated AGM-183A hypersonic missile. While its engineering parameters were well-known, its budget limitations were not. Funded to about $1.7B for its development, Lockheed Martin said its first unit cost would be about $42M. At the same time, the Congressional Budget Office thought the USG would be able to afford 100 of them at their eventual per-unit price of $15M to $18M. As a variation of the chart below revealed (C), the chance of that happening was significantly less than one in one million quadrillion, as that price put it at 108 Standard Deviations past the market’s Upper Demand Frontier. Eventually, budget realism entered the picture, and the United States Air Force stopped funding the program. In the process, it validated their Demand Frontier.

For all the work we spend extending the boundaries of engineering, we must understand that trying to exceed a well-defined Demand Frontier by leaps and bounds never works.

To know what we can do, we must first know what we can’t. That’s part of the 1st half of the problem. The AGM-183A didn’t get past that.

LM did quite a bit better with its stealthy AGM-158B, also known as the JASSM-ER, in (A) below. At the time of the study, it was the most expensive air-to-surface missile in the industry. In the 20 years shown in (C) (1997-2016), LM sold 275 units at an inflation-adjusted 2024 price of $2.5M, with the AGM-158B helping to form the market’s Upper Demand Frontier. Note that that curve is relatively flat, with a slope of -0.533. That meant the USG spent more money on the market’s lower-priced part than its upper bit.

A recent headline noted that Russia knocked down over 150 Ukrainian drones. The ineffectiveness indicates the need for missiles to be invisible to the enemy. Getting smaller and stealthier will help.

Enter the prospect of much smaller, less expensive, and (presumably stealthy) cruise missiles, the air-to-surface (specifically, anti-ship) ordnance proposed by American defense startup Ares Industries shown in (B). Designed to attack smaller vessels, the company has set a target price of $300K per missile. Of course, whether or not they pull this off remains to be seen, but the attempt is admirable, as the low price enables the purchase of up to tens of thousands of units over two decades (C). It would add flexibility in the inventory, letting operators swap expensive devices for cheaper ones when smaller packages can do the job.

In (C), since Glide Bombs cost a fraction (about 1/8 for the same payload*velocity and range) of missiles, planners can afford to buy more of these devices than powered missiles. One could imagine a future in which stealthy glide bombs dropped from unmanned drones would lower operational costs and pilot risk while increasing mission success rates.

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Saturday Morning Quarterbacking: First-Person Shooter Games

Common sense always speaks too late. Common sense is the guy who tells you you ought to have had your brakes relined last week before you smashed a front end this week. Common sense is the Monday morning quarterback who could have won the ball game if he had been on the team. But he never is. He’s high up in the stands with a flask on his hip. Common sense is the little man in a grey suit who never makes a mistake in addition. But it’s always somebody else’s money he’s adding up.
Raymond Chandler

Lots of people can tell you what you should have done after the fact.

You should have anticipated the cornerback jumping the route. Didn’t the situation call for an extra blocker on the strongside tackle when you ran a sweep his way? Why didn’t you expect they would run a blitz when they tended to do that on every fourth down? That’s what Monday Morning Quarterbacking is.

What about Saturday Morning Quarterbacking? Wait. What? What is that? Well, that’s a series of studies one puts into place to anticipate what will happen Sunday, based on the distant past, near past, and present. And for that, we’ll need data.

As any researcher knows, when it comes to data, Mick Jagger warned us, “You can’t always get what you want, but if you try sometimes, well, you might find you get what you need.”

Sometimes, large, important pieces of a picture help to envision the whole.
In (A), I wanted to get some idea of the Demand for video games, specifically the ones of “First Person Shooter” ilk. I chose that group because it is one of the most popular video game categories, with scores of titles from which to choose. I didn’t have the time to study all of them. So, I picked 26 leading titles and made some exciting discoveries.

Most surprising to me was the Outer Demand Frontier. With a slope of -1.33, more money is at the top of this line than at the bottom. Note Call of Duty—Modern Warfare 3 (COD—MW3). It helps form that Frontier, and with $2.22B in revenue, it exceeds the revenues of all but a handful of films. Apex Legends was at the low end of that line and commanded revenues of $1.21B, and, at the same time, also helped form part of the Inner Demand Frontier, which has a very flat slope (-0.404).

Figure B shows us that in fantasy, as in reality, those who play the games must make some tradeoffs. My son showed me some of the dials one can set in these games. You can have extremely high resolution or ultra-fast frame rates, but you can’t have both. Depth of field is crucial, too, and you may want to set it to the farthest reaches possible, which we might call “X.” There, you will find that your frame rate and resolution limits are lower than if you were to set the depth of field to 0.5X.

Players in the game, either the people with the controllers or the game developers, need to see how all features work in concert.

And they need to do that on Saturday morning.

#hypernomics #markets

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Market Limits and Infinite Dimensional Compression

Genius may have its limitations, but stupidity is not thus handicapped.
Elbert Green Hubbard

The International Cost Estimating and Analysis Association (ICEAA) recently held its annual Professional Development & Training Workshop in Minneapolis, Minnesota. This event, a cornerstone of professional development for our members, was a remarkable success. I submitted a paper to it, and it won the award for best paper overall.

“Market Dimensional Expansion, Collapse, Costs, and Viability” delved into several crucial yet under-explored areas. Dimensional expansion and collapse are vital to comprehending market evolution. In it, I unveiled a groundbreaking method to compress standard 3D Cartesian Coordinate Systems into as many as 16 dimensions. Theoretically, there is no upper limit to the number of dimensions that can be depicted using these methods. Equally significant was the exploration of multiple views on Demand Frontiers.

In (D), I plotted the ten-year demand figures for 95 Western Bloc business aircraft, with the horizontal axis for their quantities and the prices on the vertical. Several crucial limitations become evident when one does that.

An Outer Demand Frontier reflects the market’s saturation threshold. Any model attempting to exceed this line will find that the market has exhausted its buyers. One can drop one’s price and gain more sales, but this line is very steep and will soon intersect any Learning Curve associated with the aircraft model that forms it. Note that none of the planes in the study vastly exceeded this limit.

The Lower Demand Frontier reveals a market’s margin limitation. There are planes priced below this line but fall into the General Aviation category. They are not for business travel due to the stricter regulations by which Business Aircraft abide.

Inner Demand Frontiers are efficiency-limited. Planes to the left of this line are either 1) reconfigured airliners (where the main airliner line keeps the learning going), 2) ramping up production, 3) winding down their line, or 4) underwritten by governments. In this case, all Textron planes are going extinct, as the company gave up building these aircraft types. The Dassault planes benefited from a large subsidy from the French government, and Piaggio got the same treatment from the Italian state.

The Upper Demand Frontier is the limit that took down the Aerion AS2, as it attempted to go far beyond it. In a different market, this made the B-2 bomber stop at 21 units rather than the 132 vehicles the USAF sought.

In sum, it pays to know where your contest’s boundaries lie. In markets, as in competitive games, there are boundaries. In business, your buyers form those boundaries. Knowing what your buyers can and can’t afford is critical to developing a product with a chance for success.

In (A), I hold a 2D Demand Plane in one hand, and a 3D Value Space in the other. The paper I gave using this concept won the awards in (B), allowing me to speak to 450 People (C). Among other things, my paper addressed markets’ Demand Frontiers (D).

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Market Anatomy: 7D View In Rotation

The whole aim of comparative anatomy is to discover what structures are homologous
Libbie Henrietta Hyman.

In mammalian anatomy, we can find several similar structures in disparate species. In (A), the human arm has the same parts as a cat. Humans and cats have a median or sagittal plane running through the body’s midline, which divides the body or parts into right and left halves. That plane is at right angles to the coronal or frontal plane, one running from side to side, which divides the body or any of its parts into anterior and posterior portions. The intersection of the sagittal and frontal planes forms the body’s vertical axis.

Hypernomics finds similar structures in markets. In (B), the market for business jets, the vertical price axis separates the green Value Space from the red Demand Planes, as in (C), the market for the turbofan engines that power business jets.

Just as mammalian limbs work in concert with the rest of their bodies, the market for business jets depends on the one for turbofan engines. They meet at the vertical price axis. To see this 7D system in motion, go to https://lnkd.in/gvvxVrCq

#hypernomics #marketanatomy #innovation

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Same Function, Different Form, Common Links

The moment of truth, the sudden emergence of new insight, is an act of intuition. Such intuitions give the appearance of miraculous flashes, or short circuits of reasoning. In fact they may be likened to an immersed chain, of which only the beginning and the end are visible above the surface of consciousness. The diver vanishes at one end of the chain and comes up at the other end, guided by invisible links.
Arthur Koestler

Invisible links. Poppycock. We don’t need no stinking invisible links.

For too long, many have thought market actions were largely mysterious, their forces hidden, and actions unpredictable. When it comes to product demand, that is complete nonsense. Even when collections of products look different but do the same thing, they behave in ways we can predict.

A Invisible links. Poppycock. We don’t need no stinking invisible links.

For too long, many have thought market actions were largely mysterious, their forces hidden, and actions unpredictable. When it comes to product demand, that is complete nonsense. Even when collections of products look different but do the same thing, they behave in ways we can predict.

A Raven UAV doesn’t look anything like a Topaz satellite. Yet, doing the same mission using different altitudes, payloads, and speeds, they are bound by the same Demand Frontier, one that limits the arena’s most highly rewarded performers. If you prove worthy enough to be on the field of play, you often find a certain lower guarantee of recompense, known as Minimum Demand.

Such boundaries are only mysterious if you don’t do Hypernomics. doesn’t look anything like a Topaz satellite. Yet, doing the same mission using different altitudes, payloads, and speeds, they are bound by the same Demand Frontier, one that limits the arena’s most highly rewarded performers. If you prove worthy enough to be on the field of play, you often find a certain lower guarantee of recompense, known as Minimum Demand.

Such boundaries are only mysterious if you don’t do Hypernomics.

Spy satellites, military satellites, and Unmanned Aerial Vehicles (UAVs or drones) all perform the same mission and face identical financial limits. Below is an Upper Demand Frontier that includes models of all three groups. With a slope of -1.38, is steep (inelastic).That means more money is spent on five Topaz Spy Sats (5*$9.4B = $47B) than the 19,000 Raven Drones (19,000 *$25K= $475M).The steeper (-1.96) Minimum Demand Frontier reveals that one Mercury Spy Sat ($2B) fetches more than 19,000 RQ-I4s (I9K*$3K = $57M).

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Same Function, Different Form, Same Equation

California sunlight / Sweet Calcutta rain / Honolulu starbright / The song remains the same.
Led Zeppelin

Modern surveillance demands a lot of different platforms. The Russians run ELectronic INTelligence (ELINT) satellites over Hawaii, California, and the rest of the US (A). Western forces must get the same insight to be as well-informed.

We can get this data from airborne platforms outside of manned systems (such as the U-2 Dragon Lady, the E-3 Sentry, and the E-2C Hawkeye) by using satellites and Unmanned Air Vehicles (UAVs).

It turns out we can predict the Value (sustainable price) of Western Bloc satellites and UAVs using the same equation. In (B), with 30 Sats on the left and 30 UAVs on the right, we predict the Value of the US Mercury ELINT satellite using an equation considering 1) Payload, 2) Max MPH, 3) Altitude, and 4) Quantity sold. The Israeli Orbiter UAV (C) estimate using the same equation is highlighted in (D). With an adjusted R2 of 96.1%, its p-value is 8.83E-39.

As you might imagine, the Inner and Upper Demand Frontiers for these devices are highly correlated, too, giving direction on purchases.

More on that in another post.

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Nailing the X-Ray and Gutting “The Law of Supply and Demand”

You can observe a lot by watching.
Yogi Berra

Dante Autullo went to a hospital complaining of nausea and a headache. A passing diagnosis might have been that he had the flu. But when his doctors asked him about what he had been doing, X-rays showed that as he was using a nail gun, a nail he thought whizzed past his head went into it instead (A). They operated; he’s okay.

Easy answers have a lure. After all, who wants to dive deeply into a flu case? But details matter. Easy answers aren’t always right. Just ask Dante.

The draw to misguided and overly simplistic phenomena applies to “The Law of Supply and Demand.” As we see in (B), given their postulates (i.e., flawed assumptions), they propose a single market equilibrium point. Every time they show such an example, it never has real-world data. It is always all made up.

I’m not going to stand for it. Neither should you.

Readers of this column know actual market behavior, based on verifiable data, looks more like (C), where buyers pay for aircraft cabin volume and speed (in the left-hand Value Space) as limited by their available funds (on the right-hand Demand Plane). Upcoming posts will give you more reasons to listen to reason.

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Markets’ Visible Hand

Everything is theoretically impossible until it is done.
Robert Heinlein

Over 200 years ago, Adam Smith wrote that “[producers] are led by an invisible hand to make nearly the same distribution of the necessaries of life (Wealth of Nations, p. 540).”

The phrase “an invisible hand” is a metaphor for unseen market influences (A), still widely used in economics. It is a cousin to the maxim, “see what the market will bear,” addressing buyers’ product reactions. Proponents would have you believe that seeing these forces is impossible.

Sometimes, seeing what is invisible to the naked eye is as simple as flipping a switch. The Costa Concordia captain sailed into the Isola del Giglio (B). To prevent that disaster, all he had to do was turn on a computer that he had shut off and use its information.

Adam Smith had it all wrong.

If we’re using metaphors, using the “Visible Hand” to describe market workings is more fitting. As we see in (C), the S&P 500 formed an upper price limit on 2/20/23. It does that every day. In short, all buyers in all markets self-organize in ways we can describe and use.

To see how this works, watch the seminar recorded on Auguest, 29, 2023 further below: