I wrote earlier about the increasingly visual nature of media and news in today’s society. The prior post focused mostly on photography, but there is another visual technique that has risen dramatically in prominence in recent years, particularly online – the infographic. Infographics aim to make complex data sets easy to digest and understand. An entire newspaper has risen to prominence due to the quality of its infographics. There are whole blogs dedicated to the subject. A good infographic can pack a lot of data into a small space and help the viewer to draw out a pattern or conclusion. However if the infographic is poorly or deceptively constructed, that conclusion may not be the same one you’d see if you examined the underlying data. While there are many great and useless infographics out there, I’d like to take a bit of time to focus on a couple deceptive ones.

Deceptive Infographic #1: The Heathcare Vote

The first infographic I want to highlight comes from the otherwise excellent Political Math Blog. The diagram aims to portray the House of Representatives vote split for the recently passed healthcare reform legislation in comparison with the vote splits for other major social reform. It is an interesting diagram because it illustrates how objective information can be displayed in a manner that influences your perception of the data.

In the first three vote blocks, the dividing line between “Yay” and “Nay” is drawn down the middle of the “split” party, indicating that there are party members on both sides of the debate. However, in the final vote block on heathcare reform, the creator of this diagram has specifically arranged the colors such that the Yay/Nay dividing line runs directly between the parties, with the dissenting Democrats hidden off to the right side. This increases the contrast between the parties, and makes the Heathcare Reform vote appear more partisan and divisive than it actually was.

When viewing an infographic (or any seemingly “objective” data), make sure you consider whether or not the designer is trying to “lead” you toward drawing a specific conclusion or feeling a certain way by presenting the data in a certain manner.

Deceptive Infographic #2: Household Income vs. Debt

I originally found the next graphic on Digg, where people were whipping themselves into an outrage about how unfair life is, how capitalism is broken, and how America is headed to hell in a handbasket. Except this graphic is totally flawed (click for a full size version).

The graphic compares the trend in average household income (the green bar) with the trend in total household debt (the red bar), and reaches the “nightmare” conclusion that the latter is quickly outpacing the former. The problem in this graphic is that comparing annual income to total debt is apples to oranges. Suppose I make $50,000 a year and owe $250,000 on my mortgage. Is this necessarily a Bad Thing? No. Here’s why:

This comparison completely neglects the other side of the household balance sheet – assets. You borrowed $250,000 on that mortgage to buy the house, so you also own an asset (the home) worth $250,000 (putting aside the housing crash for a second). You also have likely saved some of your income each year, which is building up as an asset in your bank account. Both of these assets can be liquidated to eliminate the debt. The debt is only dangerous if it is not matched by an asset of equal or greater value.

In addition, the diagram assumes you never use any of the income you earn in the time between each bar (several years) to pay down any of the debt, yet you continue to borrow. If that’s the case, the prison is of your own making. I could go all day, but the bottom line is, this is a completely flawed comparison. Debt is not inherently a Bad Thing. Irresponsible debt (debt that is not counterbalanced by assets) is a Bad Thing.

The lesson here is that you should pay attention to context and the validity of comparisons before drawing conclusions, especially when data visualization is involved.

In Summary

Infographics are incredibly useful for conveying a lot of data at a glace, and draw the eye with bright colors and interesting shapes. Often an infographic is the best way to communicate data to a relatively unsophisticated or novice audience. However, when you come across a flashy data visualization, sure the author didn’t create it to tell a specific story. Always take some time to envision the data behind the chart – would the data table create the same reaction that the infographic elicits?

Update: Here is a great infographic that was sent over to me today by my friend Vanessa – it depicts the magnitude of the recent Deep Water Horizon oil spill that occurred last week in the Gulf of Mexico. It does an excellent job putting the magnitude of the spill in context with other well known spills (Exxon Valdez, Amoco Caldiz) and also illustrating just how much oil was spilled relative to the world’s daily consumption. Check it out. Even better, they make the underlying data available here.

The auto industry’s recent troubles have shoved normally secretive private equity firm Cerberus Capital into the spotlight, as its portfolio company, Chrysler, heads to Washington to ask for a bailout. Much has been written decrying Chrysler’s audacity, claiming Chrysler is less deserving than Ford or GM because it is privately held, or with headlines like “If Cerberus will not invest further in Chrysler, why should the taxpayers?”

I strongly disagree with this argument, and the general one that just because Chrysler is not public, it is less deserving of a bailout than Ford and GM. You may be surprised at the actual ownership of Ford and GM – the majority of their shares are held by investment houses similar to Cerberus.71% of Ford’s outstanding equity is institutionally owned, and in addition, 40% of its voting rights are controlled by the Ford family. GM is 78% institutionally owned.

Also, why is the public not aghast that Ford and GM cannot raise additional equity from their existing shareholders? If Ford and GM cannot float additional equity on the public market, why should the taxpayer invest? The answer is that none of the Big 3 can raise additional equity because their market cost of capital is astronomical. This is why the government has to step in – neither the private nor public markets are willing to make any sort of further bet on these companies.

In addition, Cerberus has agreed to forfeit any profit it may make on its Chrysler investment if it receives government money. Ford and GM’s public shareholders have clearly made no such promise.

To be clear – I am in no way in favor of a bailout for any of the Big 3. These are sick companies, and they need to die. However, discriminating against Chrysler because they are privately held is really inappropriate.

I had an amazing experience tonight on Facebook that I thought I would share.

Barack Obama is coming to Wake Forest tomorrow. Limited tickets were available for free on a first come, first serve basis to the student body. Unfortunately, I wasn’t quick enough, and didn’t get a ticket, and neither did my two roommates. After four years at Wake, I’ve missed the chance to see a number of big name political speakers, and I wanted to make sure I got to see at least one before graduation.

I tried emailing my fraternity’s listserv to see if anyone had any extra tickets they weren’t using – no luck. I emailed the president of the campus College Democrats – no tickets left, the event is sold out. However, I was determined to get a ticket, so I turned to the best medium I knew to contact as many college students as possible – Facebook.

At 11pm tonight, approximately 10 hours before the doors were scheduled to open for Obama’s speech, I created a Facebook ad offering $25 to anyone with extra tickets. I was easily able to target it to all students at Wake Forest (though I could have customized it further – by interests, class year, major, and many other criteria). I chose to pay per click, and set a maximum budget of $5. After I pressed “Create my ad”, it was a matter of minutes before Facebook had shown my ad over 6,000 times. Within the hour, I received messages from 4 separate people offering to sell me their tickets. The entire thing cost me $4.97 – that’s only about 8/100ths of a cent per impression. (As a side note – this is incredibly low as far as online advertising goes – a problem for Facebook that has been mentioned before as one of their biggest weaknesses)

Tomorrow morning both of my roommates and I will see Barack Obama speak in a sold out coliseum that I didn’t even have tickets to until less than 10 hours before the event.

Now that’s the power of the internet and social networks – and it’s those kinds of results and precise targeting that make Facebook worth $15 billion (though I do think that’s a bit high, considering their monetization difficulties).

As the presidential elections approach, we’re hearing more and more (especially from the Democrats) about raising or eliminating wage caps for social security taxes (as a side note – this would represent the largest tax hike in American history), repealing President Bush’s tax cuts for the rich, or other various plans that would further increase taxes on the top 25% of American wage earners.

I was forwarded the following parable, written by David R. Kamerschen, Ph.D. Professor of Economics at the University of Georgia entitled “Barstool Economics”. I think that while it is a bit simplistic, it is definitely timely and interesting.

Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:

The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.

So, that’s what they decided to do.

The ten men drank in the bar every day and seemed quite happy with the arrangement, until on day, the owner threw them a curve. “Since you are all such good customers,” he said, “I’m going to reduce the cost of your daily beer by $20.” Drinks for the ten now cost just $80.

The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. But what about the other six men – the paying customers? How could they divide the $20 windfall so that everyone would get his ‘fair share?’

They realized that $20 divided by six is $3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man’s bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

And so:

The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33% savings).
The seventh now pay $5 instead of $7 (28% savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).

Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.

“I only got a dollar out of the $20,” declared the sixth man. He pointed to the tenth man – “but he got $10!” “Yeah, that’s right,” exclaimed the fifth man. “I only saved a dollar, too. It’s unfair that he got ten times more than I!”

“That’s true!!” shouted the seventh man. “Why should he get $10 back when I got only two, the wealthy get all the breaks?”

“Wait a minute,” yelled the first four men in unison. “We didn’t get anything at all. The system exploits the poor!”

The nine men surrounded the tenth and beat him up.

The next night the tenth man didn’t show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn’t have enough money between all of them for even half of the bill!

And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier or not reinvest in the community.

Just some food for thought…

First Past the Post: Holding the United States Back

The Case for a Two Round Election System,
and the rise of the American Third Party

The United States presidential system is the crown jewel of America’s political identity and one of our most cherished institutions. Because of this, we as Americans are extremely reluctant to revise our system, however badly it may need it. In recent years, the weaknesses of the United States’ First Past the Post election system have been exposed, even highlighted, by the election of plurality presidents in two of the last three general elections. This is a large problem for the functioning of the government, not only is the plurality president often ineffective because of lacking congressional majorities; he also lacks the mandate of the people, decreasing the legitimacy of his government.

First Past the Post is an inherently flawed election system because it is a zero sum game. The winning candidate wins absolutely, and his absolute victory is counter-balanced by the absolute loss by the other candidates. This often leads to plurality presidents when more than two candidates are involved in the election. It also ensures that the (often significant) portion of voters that did not vote for the winning candidate are entirely unrepresented by the president elect. First Past the Post works best in a strictly two party system, with two candidates, ensuring that someone will receive a majority. In fact, French political scientist Maurice Duverger argues that a First Past the Post election system naturally leads to a two party structure [i]. Duverger’s argument has clear examples in the United States’ electoral past. In the 1836 presidential election, Martin Van Buren, the Democratic Party’s candidate, won 50.83% of the popular vote, and was elected to the presidency. He was opposed by three candidates: William Harrison (36.63%), Hugh White (9.72%), and Daniel Webster (2.74%), all of the Whig party. It appears that the Democrats handily defeated the opposition (a 14.2% lead over the next closest vote getter). However, upon closer examination, had all of the Whigs consolidated their votes, they would have commanded 49.09% of the vote, leaving the Democrats with a razor thin 1.74% margin of victory. In the following election, in 1840, the Whigs all campaigned behind a single candidate, William Harrison, and garnered 52.88% of the vote, compared with Van Buren’s 46.81%. The Whigs learned an important lesson in consolidating for victory, an example that has been followed by many contemporary political groups that compete in First Past the Post systems. Just as the similar Whig candidates consolidated to achieve victory, smaller political parties are forced to conglomerate to form a larger contingent that can garner an electoral majority. In fact, the 1840 election was the last time in United States history that an election would be (seriously) split between more than two candidates [ii].

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