Stock-Price Milestones

Most milestones have an arbitrary quality, relying on the roundness of a number to make 500 seem more meaningful than, say, 493. But stock-price milestones have an extra layer of meaninglessness. If you know why, you can stop reading. However, the huge amount of media coverage for Google’s stock price breaking $500 last week suggests to me that some people might want to read on.

Here’s the problem: A company’s stock price is not comparable to other companies’ stock prices, nor is it necessarily comparable to itself over time. This is because the stock price represents the market value of the company divided by the number of outstanding shares. So changing the number of outstanding shares can change the price without changing the value of the company.

An example: Microsoft’s share price is currently about 6% of Google’s share price, yet Microsoft’s market value (share price x shares outstanding) is roughly twice that of Google’s. The difference is, Microsoft has a lot more shares outstanding.

In fact, since going public in 1986, Microsoft has split its stock nine times. A split is when a company issues multiple new shares per existing share, often 2 for 1 but sometimes with other ratios.

At this point, a single share of Microsoft IPO stock—that is, before any of the splits—would equal 288 shares of current Microsoft stock. As of today’s closing price ($29.36), that original share would now be worth $8,455.70. But something tells me that the press is not readying articles about Microsoft’s breaking the $8,500 barrier.

By contrast, Google has never split its stock. Combine that with Google’s fantastic run of financial performance, and you get $500 per share, a number rarely seen with tech companies. That sounds like news until you realize the number is rarely seen because other high fliers have chosen to split their stocks well before reaching $500.

And we haven’t yet mentioned the reverse split, where a company reduces the number of outstanding shares, thus raising the price. Some of the dot-com-era survivors did reverse splits to get their stocks up to respectable-sounding prices. Reverse-split at a high enough ratio, and you’ve got a $500-per-share stock.

You get the idea. An actual milestone measures the distance of a mile. With a stock-price milestone, your mileage may vary.

In Praise of the Apple Corer

One of my favorite examples of good design is the apple corer. As a simple, efficient solution to a problem, it has few peers in the kitchen.

This apple corer slices an apple into eight sections while separating out the core. Just put it over the top of an apple and push down.

But wait, you say, isn’t a knife an even simpler tool: a single blade and a handle? Indeed a knife is a simpler and more versatile tool. But for sectioning an apple, it’s an inferior solution.

For a knife to achieve similar results to the apple corer, you’ll be making several slices into a wobbly apple. If you’re reasonably fast and accurate, you might get it done in 15 seconds and still have your fingers intact. Meanwhile, I will have been done in roughly 1 second, without concern for slicing flesh instead of apple.

So if you are a regular apple eater, it’s worth using the right tool for the job. When you do, savor the difference.

Election Night 2006 Graphics

On election night 2006, all the U.S. news organizations were working the same story: Can the Democrats take the House of Representatives and Senate?

Each organization had more or less the same data. But how they showed the data was different.

I took the following screenshots around 8:15pm PDT on November 7th. All were from new organizations’ home pages or otherwise accompanied headline-level information—that is, these graphics were meant to convey the essence of the story; they were not “drill downs” of detailed data.

The Washington Post

The story is about a relatively small numbers of seats potentially changing hands, so the reference to net gains is good. The graphic is conceptually clever, but I don’t know how many people will understand it at a glance. The white space in the middle of each bar represents undecided seats; thus, the pink versus blue bars are racing to be first across the centerline.

CNN

Let’s start with the lower graphic, for the House: I get it, although the scale is odd. The bars are configured as if both sides are racing to 435. Yet as noted at the bottom of the graphic, 218 is the meaningful number. This awkwardness shows the wisdom of the Washington Post’s “race to the centerline” approach, which more clearly reflects that a seat gained for one side is a seat lost for the other.

As for CNN’s upper graphic, for the Senate: Why does each bar have two shades? It’s not only inconsistent with the House graphic but it does not appear to be explained.

Fox News

I had to shrink this one to fit because it ran most of the way across Fox News’ home page.

On first glance, I’d assume that the distribution of red versus blue represents the relative percentage of seats held. However, the amount of red and blue is the same for both House and Senate, even though the numbers are different (Democrats well ahead in the House, Republicans slightly ahead in the Senate).

So apparently the red and blue don’t move with the numbers, and thus do nothing beyond ornamentation.

MSN

Perhaps in response to Fox’s ornamental graphics, MSN went for an old-school table o’ numbers. MSN’s Microsoft heritage is evident in the design, which appears to be inspired by a PowerPoint 97 template.

The weird thing about the table is how it feels like it should add up to 100, but the “6 undecided” are not in there. Also, do I really care about “Seats not at stake?” I’m forced to care, because it’s the only way to understand the rest of the table, which is a problem. Just tell me what’s changing and how it affects the balance of power.

MSDN

Now this is an interesting attempt. You need to perceive that the gauge’s pointer can go left or right, and that leftward is Democrat, and rightward is Republican. If you get that, it’s a good quick-glance view, assuming your eyes are sharp enough to read the gray-on-white numbers.

Nitpicking: Why does the Senate “decided” column have white in it and the House “decided” column does not? And what about independent candidates? For the Senate, where the balance of power turned on only a few seats, two independents won. Seems like that should be part of the visual story.

New York Times

Using a map as a visual metaphor is often a good idea, but not when you distort the map to the point where its lack of fidelity is a distraction. In addition, six color codes is probably too many.

In the Times’ defense, this graphic was doing double duty as a user interface. You could click a square to get more detail on that district. Thus, each square arguably needed to be a minimum size for clickability. Or, counter-arguably, if the above graphic was the result of each square needing to be a minimum size, then they needed to do something different in the first place.

ABC News

This is my favorite. It’s not about 100 Senate seats; it’s just about the change in balance of power. It tells us the magnitude and direction of change, and it provides the context for how many seats are necessary for the Democrats to take control.

And that’s all it does. Works for me.

Round-Up and Wrap-Up

If you scroll back up through the various graphics, I think you’ll find that other than ABC’s (and, to a lesser extent MSNBC’s and the Washington Post’s), they made the story more complex than necessary. They each did one or more of the following:

• They gave nonessential numbers (for example, MSN’s “Seats not at stake”)
• The numbers they gave were anchored in total seat counts when the real story was the change in a small number of seats (for example, CNN’s race to 435)
• They used graphics that confused more than enlightened (for example, Fox’s unchanging red versus blue, the New York Times’ abstract map)

All this goes to say, it’s not easy to create these graphics, especially in the TV news field, where more information on the screen is often mistaken for better information.

Congratulations to those that managed to keep the numbers, as they say in Washington, DC, “on message.”

One Person, One Vote, Many Voting Systems

In an election, winners and losers are sometimes determined as much by the voting system as the voters. For example, the United States’ Electoral College allows a candidate to win the U.S. presidency without winning the popular vote, as happened in 1824, 1876, 1888, and 2000.

In San Francisco, we have a special voting system, Ranked Choice Voting, for certain local elections. Instead of voting for a single candidate, voters rank their choices.

Given a population of voter preferences, Ranked Choice Voting not only can lead to different results from traditional voting but it can also have different results among the various Ranked Choice Voting implementations.

The implementation of Ranked Choice Voting that San Francisco uses, Instant Runoff Voting (IRV), works like this:

• You rank multiple candidates for an office, indicating your first choice, second choice, and so on.
• If no candidate attains a majority of first-choice votes, the candidate with the fewest first-choice votes is eliminated.
• Those who voted for the eliminated candidate have their second-choice votes added to the remaining candidates’ totals.
• If that reallocation does not create a majority for one candidate, the process continues until a majority is reached.

The process is called Instant Runoff Voting because it resembles a series of run-offs. Whereas traditional run-offs happen over time, IRV gets all the necessary information up front, allowing all elimination stages to occur immediately.

Wikipedia’s entry on the subject gives an interesting example of how the same voter preferences can have different results depending on the voting system. (I’ve added some definitions, in brackets, to the Wikipedia text.)

Imagine an election in which there are three candidates: Andrew, Brian and Catherine. There are 100 voters and they vote as follows...

#	39 voters	12 voters	7 voters	42 voters
1st	Andrew	Brian	Brian	Catherine
2nd	Brian	Andrew	Catherine	Brian
3rd	Catherine	Catherine	Andrew	Andrew

In a plurality election [where the winner is the candidate with the most first-choice votes], Catherine would be elected.

In a [standard] runoff election, the voters would choose in a second round between Catherine and Andrew.

In [a San Francisco-like Ranked Choice Voting] election Andrew will be elected.

Under Condorcet’s method [each ballot’s rankings are converted into pairwise preferences, such as A beats B but C beats A, which are then tallied across all ballots] or the Borda count [each candidate gets points in proportion to his/her rank on a ballot, such as first-choicers get 5 points and fifth-choicers gets 1 point] Brian would win.

Don’t worry about processing the details. Let’s cut to the implications (also quoted from the Wikipedia article):

[Instant Runoff Voting] may be less likely to elect centrist candidates than some other preferential systems, such as Condorcet’s method and the Borda count. For this reason it can be considered a less consensual system than these alternatives. Some IRV supporters consider this a strength, because an off-center candidate, with the enthusiastic support of many voters, may be preferable to a consensus candidate and that this candidate still must be accepted by a majority of voters.

IRV produces different results to Condorcet and the Borda count because it does not consider the lower preferences of all voters, only of those whose higher choices have been eliminated, and because of its system of sequential exclusions. IRV’s process of excluding candidates one at a time can lead to the elimination, early in the count, of a candidate who, if they had remained in the count longer, would have received enough transfers to be elected.

You get the idea: same voter preferences, different results.

And for a final twist, does the scenario with Brian, Andrew, and Catherine work in the real world? It assumes that the voter preferences and the voting systems are independent—or, put another way, that different voting systems would elicit the same preferences.

But in a real-world election, candidates know which voting system will be used, and they target their campaign spending to shape the preferences of specific segments of voters. Depending on the voting system, it could make sense to target different voters, thus leading to potentially different preferences.

The takeaway: A lot of potential complexity lurks behind “one person, one vote.”