Notes – Edward Tufte’s “Presenting Data and Information”

Edward Tufte is a Yale-connected academic who conducts several private seminars around the country each year promoting his view of visual design for the display of quantitative information and statistics. He has published multiple books through his own publishing mark such as The Visual Display of Quantitative Information, Beautiful Evidence, Envisioning Information and Visual Explanations. His personal website which contains articles, research papers, examples of his work and principles and other information is at EdwardTufte.com. A friend who is a fan has blogged some notes about the man and his seminar courses.

If I were to summarize Tufte’s philosophy of information design into a single sentence, which is certainly a crude way to approach the nuanced and thoughtful lifework of a person, I’d say this– beautiful design means creating the highest density information display the resolution of your medium will allow. This stands in stark contrast to the reigning paradigm of “less is more” and sacrificing much of the available real estate of an information display for white/empty space, navigational or UI elements and “inference assists” (my term) such as arrows, boxes and non-data lines which are supposed to draw the viewer’s attention to what’s important or where to focus their eyes.

In Tufte’s own words, he summarized the philosophy with the pithy, “The information is the interface; maximize content reasoning time; minimize design decoding time.” [Note: on my hand-written notes written in a darkened room early in the morning at the start of his seminar, I think I mistakenly wrote “maximize design decoding time” but meant to write “minimize”.] Even more pithy, and in Tufte’s own words:

The purpose of information display is to assist thinking about its content.

I attended his seminar in San Diego, CA in February. Below I am posting my notes which may or may not be useful to a person unfamiliar with his work or the content of the seminar. Tufte, who introduces himself as “ET”, likes to circulate amongst his audience before, during and after the session and introduce himself– clearly he enjoys what he does and appreciates the people who have taken an interest in his work which is a good professional example for others to follow.

  • The information is the interface.
  • Idea: maximize content reasoning time; minimize [maximize? see above] design decoding time
    • design decode effort/time is wasteful as the pattern for design is often not repeated in the future
  • Graphics are only useful when there is a lot of data, not a little bit of data
  • Design should encourage scanning, scrolling and choosing
  • Increases in resolution allows for spatial adjacency [note: this is the idea of putting lots of information side-by-side versus having to change mediums, windows, displays, repeatedly to compare and contrast blocks of information]
  • Digital display screen resolution is finally approaching “P.A.P.E.R. technology” (paper) resolution
  • Simple, clear conventional design with rich, complex data is preferable to complicated design devoid of content; many designers invest too much effort in display relative to content quality
  • NYT, WSJ are highly trafficked websites high in information density (many links, many pieces of data and text) which demonstrate this approach is desirable for design of corporate sites
  • Names have reputations, put your name on your work
  • Reasoning on a flat surface means all viewers can go at their own pace; a slideshow makes most people wait; think “documents” not “decks”
  • Listing sources for data provides credibility and reasons to believe
  • Look at sources, start points, end points, rates of change, to examine whether a chart establishes a relationship between evidence and conclusion
  • Annotations help explain all data by providing specific information about one data point captured in the graphic
  • Look at “excellence in the wild” to contrast your own efforts against the pros
    • Use Word, not PowerPoint
    • Be web-based
  • Order data tables by performance, not by alphabet; performance often tells a story
  • ESPN.com demonstrates that even complex data can be appreciated by lesser intellects (!)
  • Dashboards are idiotic and no way to operate a business or institution
  • How to Make A Presentation, some tips:
    • show up early (head off problems, ensure equipment works, room not double-booked, etc.)
    • talk to people
    • give them a document for discussion; don’t give it in advance of the meeting, no homework
    • begin meetings with study hall, people can read faster than you talk
    • the document addresses the principles of individualism and personalization as people can take what information from it they deem important
    • PPT disappears as you go higher up an org chart, the top execs have no time for the “long and winding road” (Steve Ballmer anecdote); submit ideas to discuss as written documents
    • provide intellectual leadership about content, stop discussing production methodology
    • finish early, your audience will thank you
    • Remember “Problem, Relevance, Solution”, three necessary components of any good presentation
  • How does Jeff Bezos run a meeting? Read the Forbes article or watch this Charlie Rose interview:
  • Applied presentation tip– provide notes/documents of medical concerns for a doctor to read during your doctor visit; this is what they’re trained to do and they’ll pay more attention to the information if you give them something to read
  • Check out The Public Library of Science and its templates for ideas on content rich documents
  • You can copy the source code from EdwardTufte.com and use the CSS to apply style ideas to your own blog or website
  • Real reading entails looting and hacking the valuable materials useful for later efforts, liberating them from the text; always read with an awareness for context (what came before this, what comes after, why did the author write it?); this echoes the idea of “making the work your own” of Mortimer Adler
  • Refer to “Beautiful Evidence”, pg. 78-79, using diagram trees appropriately (annotated linking lines)
    • links need to convey causality and action
    • replace generic lines with words and numbers– annotate!
  • Turn fundamental principles of analytical thinking into design decisions
  • The purpose of information display is to assist thinking about its content
  • Don’t pre-specify a data display method, use whatever method the job requires
  • Look at Google Maps and ask IT why you can’t achieve similar design capabilities; their maps are rich, colorful, multi-dimensional, varied fonts and orientation of information, etc.
  • Refer to “Visual Explanations”, pg. 90-91
  • Refer to “Beautiful Evidence”, pgs. 82-83, 114-115; exploring words, numbers and images together
  • Today’s computer interfaces separate and segregate information based on the method of production
  • Statistical graphics can be anywhere a number or letter can be
  • Statistical graphics can have the same resolution as topography
  • Refer to “Beautiful Evidence”, pg. 46-47, “sparklines” method for creating text-sized data graphics, embedded within text (inspired by Galileo’s revelation of Saturn)
  • “Nature” magazine has some of the best data-driven graphical displays, good place to look for examples of the possible
  • Why aren’t all data displays excellent? Tufte suggests there is a profit-driven bias and the dominance of Microsoft combined with the lack of scientific rigor of many data designers results in a failure of the “public spirit” principle; color me skeptical about profit and “public spirit” being at odds!
  • Excel, Google Analytics can both produce sparklines
  • Refer to “Beautiful Evidence”, pg. 58, for the famed Swiss mountain maps, or see this video (YouTube):
  • The human eye-brain optic system operates at 20mb/s in 16-bit color, digital displays don’t come close to this much data and resolution
  • Content and credibility are the keys to presenting and spectatorship
    • have the sources been credible in the past?
    • demonstrate your understanding of detail and mastery of verbs, not nouns (not who is who, but who does what to whom?)
    • threats to credibility: lying, cherry-picking (evidence vs. evidence selection), over-polished, hidden or absent sources (“proprietary”, “legal liability”, “violate federal law”, etc.)
  • Know your content, not your audience; maintain respect for your audience
    • “know your audience” leads to pandering
    • use presentations as a teaching moment to inform people of your content
  • Scan lots of material and drill down where you see discrepancies for superior economization on large volumes of data to achieve relevance
  • Investigate how data was measured; go out, walk around, see the process producing the data
    • people can not keep their own score; the metric is gamed as soon as it becomes important
    • eg, Google words are gamed by SEO, so use Google Images to search
  • Refer to “Beautiful Evidence”, pg. 32-33 for “small multiples” concept; use the need to learn a repetitious format to get people to focus on the content
  • Universality and “forever ideas”; Galileo was the supreme data designer; why should the “best thing ever” have occurred recently versus long ago?
  • Personal curiosity– why are US internet pipelines significantly slower than other developed nations?
  • Spatial adjacency versus temporal stacking (hi-res vs. low-res)
  • Different modes of display are not competitors, they are co-operators in communicating information; no one display is optimal

Notes – Horizon Kinetics 2014 Compendium, Skepticism About Indexation

For the last two years, Murray Stahl and Steve Bregman of Horizon Kinetics have published a “Compendium Compilation” of their various research pieces and market commentaries throughout the year. I recently requested copies of the 2014 and 2015 compendiums and just completed reading through the 2014 compendium.

The Scourge of Indexation

The single biggest trend that Stahl and Bregman have been criticizing for years is the rise and dominance of indexation as passively-managed ETFs as the practical consequence of widespread adoption of the Efficient Market Hypothesis. I collected comments from several different essays and stitched them together into a meta-commentary on the phenomenon:

We are reliably informed by many academicians that growth, value, momentum, yield and volatility are fundamental attributes for portfolios and, as such, are the determinants of performance. Numerous studies assert this as true. However, the studies were all done on the opportunity set of stocks, not actually on funds organized upon the findings of the research. In other words, these studies predate the implementation of the conclusions of the studies.

The efficient markets hypothesis is subject to no serious scholarly challenge. Indexation is by far the largest investment strategy and it is growing in acceptance by the day.

One could argue convincingly that markets are efficient if the market place is made up of a multiplicity of active managers gathering information and, by their trading, expressing that information in the prices of securities. However, as we saw in the Facts and Figures section, if the majority of the dominant investors, who are also the marginal buyers and sellers, are now passive, and if this dominance is growing, how can one be sure that the efficient market model remains a valid assumption?

What does it mean when one — that is, the investment ecosphere — creates multi-trillion-dollar managers that are valuation indifferent?

You cannot merely have trillions of dollars invested in indexes and assume that everything will be the same as it was before they were investing in indexes.

For 40 years, indexation worked because of four trends. There was a strong fiscal stimulus to promote the demand in most countries. Companies engaged in cost-cutting and eliminated marginal products and divisions, thereby increasing margins. Corporate tax rates have been declining for 40 years, and interest rates have been declining for decades. Companies, however, cannot count on those four benefits anymore.

We are going to replace poor judgment with no judgment whatsoever.

…an unintended consequence of the indexation movement is the creation of quasi-permanent holding companies for [S&P 500 and other major index stocks]

To my mind, the rise of indexation represents something of a corporate governance crisis in this country and any other where passive index funds account for a substantial proportion of the total shares outstanding in the market place (for purposes of this argument, I’ll peg that number at 20% which just so happens to be how much are currently owned by passive funds according to a recent New Yorker piece). Looked at in very simple terms, that is 20% of the shares of the average public company that have no active agency behind them, that is, there is nobody scrutinizing the operations of the company and the efficacy and honesty of its management by or on behalf of the shareholder whose capital is at risk. Given how many individual and even institutional shareholders are already “actively disengaged” from their duty to provide capitalist oversight of the companies they own, this is a troubling context to invest in if you believe that sound corporate governance is a key ingredient for above average investment returns and safety of capital at risk.

It reminds me strongly of one of the quotes from my recent review of Panic, “Underpinning the ideology of modern finance is the notion that the insight, judgment and even diligence of the entrepreneur are irrelevant for investing in public securities markets. These markets, we are told, are special, too powerful and too perfect to allow any entrepreneur’s judgment to matter.”

This indexation phenomenon has gone beyond influencing the markets to the point that it is “making” them, an inevitable consequence of gamification:

BlackRock… has issued a call for reform… [their] paper calls for the standardization of features of newly issued bonds. For example, an issuer would not be free to issue bonds with any features it wanted; it would have to issue them in certain standard packages, which are defined in the paper. BlackRock’s proposed change is an example of how indexation as a business is beginning to reflect the market as it impinges upon the index providers’ business needs.

Bonds have different characteristics because they represent different kinds of risks with different kinds of borrowers and lenders. While it’s possible to standardize anything for most applications, this is decidedly a “new era” where the standardization process is not being driven by the desire to reduce costs and confusion for borrowers and lenders per se, but rather it is being driven by the desire to efficiently index such media whose performance can then be captured in an ETF. It’s an important difference considering the fact that risk can not be standardized away just so that an investor can more easily allocate his funds.

In time, these indexes just end up playing themselves, as Stahl warns:

It is important to keep track of how the indexes are going to be tilted because that has two sets of implications. First, it has implications for the businesses of the index orchestrators, but second, it has implications for the entire marketplace. Whichever way a given sector gets tilted, either positively or negatively, the amount of money involved is so huge that it is going to be either the best-performing sector or the worst-performing sector.

Some Other Strange Side Effects Of Indexation

I captured a few other anecdotes related to indexation and EMH that I thought were memorable. One concerned the changes occurring in the utility industry. Stahl shared numerous statistics demonstrating the rapid rate of increase in solar power production, explained the different economics of solar (especially once installed) compared to gas, coal or nuclear powered generation and then surveyed the effect that the reach for yield and the indexation of the utility industry have created “priced to perfection” conditions in the publicly traded utilities firms. He concluded:

The asset allocation to yield-oriented stocks relies upon historical data regarding stability of dividends, which date back decades. The allocators treat this data as if they are immutable, scientific constants… They are completely unaware that a dividend quality constant is about to manifest a certain degree of inconstancy… This is an important phenomenon happening in the world of utilities, and people should remain very cognizant of it.

He also commented on the role volatility plays in the EMH:

In theory [institutions] are all fleeing volatility, but in reality are they merely fleeing volatility or, said another way, is volatility merely wherever they are going to be?

Connected to that idea is the degree of correlation which many investments are experiencing:

One can sell all of one’s investments and replace them with gaming stocks, and still have a correlation of 0.9726 with the S&P 500. It is an incredible statistic when you think about it.

Why should a presumably rational investor buy the more volatile Russell 2000 Index for a long period of time only to see it fail to outperform, or even underperform, the less volatile S&P 500 index?

And he brought further scrutiny on the idea of boiling down the predictive performance of a stock to one or two variables, such as volatility:

Companies possess many characteristics so it is difficult to assign causative factors to any one of them without knowing the other characteristics in that factor universe.

Miscellaneous Ideas

I also enjoyed Stahl’s commentary on including land in one’s diversified portfolio (again, these comments are stitched together from various essays):

Land held its value during the Great Depression.

Comparing and contrasting land with gold, it is clear that there were many periods when gold did not appreciate.

Government regulations sometimes affect the value of gold, but it is hard to envision government regulations that would affect the vast panoply of land resources in the world in some uniform way. Therefore, land is worth considering as a portfolio asset.

Land is not a hedge against political instability, which gold is because gold is mobile. Land is not mobile so it is only a hedge against inflation, not against political instability. Sometimes political instability and inflation come together.

He shared a contrarian view on eliminating an equity from consideration simply because it carries a high earnings multiple:

We cannot merely assert that if a company trades at 57x earnings, we will dismiss it as an investment. That would be an escape from reality… a Google at 15x earnings would be preposterously valued.

As long as it is possible to create companies at this scale of revenue, then not a few companies will trade at high P/Es. it looks like it is going to be a permanent part of the investment landscape.

Google’s valuation at the time it went public was around 57x earnings, and it’s market cap exploded from there. An interesting question is why it wasn’t valued even more highly given its realized potential?

Stahl observed a dichotomy between bond market interest rates and duration:

The interest rate is more or less engineered by the Federal Reserve, but the weighted average life reflects the risk preferences of bond investors.

Finally, I really liked this “bubble” related quote he shared from G.K. Chesterton:

There are no rules of architecture for a castle in the clouds.