Cory Doctorow and Glenn Reynolds both think the de-coupling of insurance from employment would be a good thing for innovation.

Pair Programming Reduces Errors by 80-98%?

Pair Programming is one of the best-known tenets of the eXtreme Programming methodology. It is probably also one of the most controversial. I think it probably has many benefits, but one of the subtler ones revolves not around positive productivity, per se, but rather, mistake avoidance.

Let me tell a non-programming story to illustrate. A few years ago, my wife Beth and a neighbor friend of hers conspired to have us husbands build decks on to hour houses. Neither Dave nor I had ever built anything like a deck before. We were both about the same level of mediocrity as far as home-maintenance DIYers--advanced-beginner to intermediate in terms of skills and competency. But decks sounded good, so we signed on.

It was great to have someone to work with, for many reasons. But the reason I am interested in is short-cuts. Occasionally short-cuts can be good, but probably more often they aren't. Particularly in the hands of novices. Here's what happened, every time I would think of a short-cut (and vice-versa).

Normally, if working alone, I might think of a short-cut, consider it briefly, and then proceed. Often proceeding to regret it, within minutes or hours. However, when working with a partner, the unavoidable first step is to explain the shortcut. And what transpired, much more often than not, was that, about half-way through explaining my short-cut, I would "hear" the bad ideas actually coming out of my mouth, and I would drop the idea abruptly and rather sheepishly.

I think that same principle applies to pair programming. In software, it is the mistakes that kill you. If programmer B were only half as fast as programmer A, but never made a mistake, he would be by far the more productive programmer. So anything that reduces mistakes, really pays off.

To really see how this could work on a pair basis, you need to look at the math, which is simple, but deceptive. Suppose the typical programmer makes mistakes 10% of the time (whatever that means, exactly). If you add a second "pair of eyeballs" to the mix, and assume that their mistakes are non-correlated to those of the first programmer, then you have reduced the mistake rate from 10% to 1%! (10% * 10% = 1%; this is one of many examples of the "power of redundancy")

Firefox Add-In Idea: Auto-Add Current URL(s) to Google Reader

During the course of my days, I stumble across a lot of articles that I'd like to read, later. Partly because I don't have time at the moment, and also because, more and more, I like to print stuff and read it off-line. Sometimes that is because I need exercise reading material, other times simply because it is much more pleasant to read, comfortable in a comfortable room of my house, rather than hunched at the computer.

Anyway, the feature I want is a button to click, on the FireFox toolbar, that adds the current URL to my Google Reader. I can't believe I am the first person to think of this, but I searched and didn't find anything.

Primaries--Glad They Are Not Settled

As discussed, I am no fan of front-loading the presidential primary schedule. So I am very glad to see that the first 4-5 primaries have really decided very little, and it all seems to come down to super-Tuesday. (I'm not glad that it ALL has to come down to super-Tuesday, but that's better than having it all settled by Iowa and New Hampshire.)

Need a way to retrofit zoned heating into forced hot-air homes

Let's face it, we had our energy wake-up call 35 years ago, and we have continued to live pretty much exactly as before, instead of making changes, some of which might have been more disruptive (less driving and driving alone), some of which seem like they would have been fairly easy.

In the latter category I would put: building houses to be more energy-efficient. I am a notorious home-thermostat nazi, but even I get tired of being chilly in my own house. But I just can't justify heating 3000 square feet, when only one or two people are at home (I work from home 2 days/week, so that one person is often me). The design question is--why do I have to choose between the extreme of 3000 chilly square feet or 3000 warm square feet? We all know that we tend to use 1-2 rooms of the house most of the time, typically the kitchen and the TV room. Why can't I close those off, and have zoned heat that let's me keep them at 72, while the rest of the house cools down to 60?

As I noted, if we had any brains at all, we would have been building houses to support this option, lo these last 35 years. In the absence of that, we need a way to retrofit the typical, suburban forced-hot-air system to support some heating zones. But there would still be the problem of doors--retro-fitting them into my floorplan could be physically done, but it seems like it wouldn't look so good.

(Yes, I know, we also shouldn't have been building 3000 square-foot houses, either. I agree. I would like to trade mine for a townhouse.)

Prepare for a Gruesome Retirement

Scary, scary article on the retirement prospects of those working today. Although my ideological ideal runs toward libertarian and laissez-faire, I think this problem is severe enough that I would, at least in theory, support government-mandated personal retirement savings.

Re: Caveat Emptor

One more thing from the Joel article on the "sins" created by the motivation of a sales commission, regarding a customer "returning" an extended warranty (just the warranty, not the product it covered):

The manager acknowledged that CompUSA's returns policy covered an extended warranty (which, as everyone knows, is almost all profit for a retailer). Still, the salesperson objected.

At first, I thought that the customer had been duped into buying a warranty she didn't want and was trying to return it, so it was unclear why the clerk was giving her such a hard time. But then I realized that the argument was over the fact that the salesperson had given the customer a discount on the merchandise, paid out of his own pocket. In exchange, the customer had agreed to buy the extended warranty, which would have resulted in a nice bonus for the clerk. Now she was returning the high-margin warranty while happily pocketing the discount. The customer had double-crossed the sales clerk!

That is hilarious. I hate extended warranties, which are notorious for being the most profitable item in the store. I remember once I was at Best Buy, purchasing a refrigerator (famously long-lived appliances, the last thing you would want an extended warranty on), and I had to interreupt the sales girl's spiel 3 times, to insist I wasn't interested in hearing it. She got into a mild argument with me about how could I make up my mind without hearing her out?

If she were more experienced, though, I think she would learn that there is no point arguing, you will never change the mind of someone who is onto the game, and willing to interrupt you mid-sentence to let you know that. You are wasting your time, in addition to pissing him off. The sales pros learn this. The problem for retail is they have rank amateurs. Given the high turnover, almost nobody becomes more experienced.

Caveat Emptor

Great Joel article on the "sins of commission"--the anti-customer (and sometimes anti-employer) behavior that can be created by too-clever financial incentives.

I also really like Joel's solution:

...we were worried that the same thing would happen if we paid salespeople on commission. I had a recurring nightmare of salespeople gone crazy, going to ridiculous lengths to make sales and ruining Fog Creek's hard-earned reputation as a friendly, win-win kind of company.

But we soon realized that commissions weren't the only management tool at our disposal. We simply established as a rule the idea that gaming the incentive plan was wrong and unacceptable. Employees generally follow the rules you give them -- and if they don't, you can discipline them or, in extreme cases, dismiss them. The problem with most incentive systems is not that they are too complicated -- it's that they don't explicitly forbid the kind of shenanigans that will inevitably make them unsuccessful.

I think this is a great, common-sense solution. Probably doesn't scale as well in big companies, but it is a great starting point.

Sign of how boring MS-Office has become

My company is using Office 2003. Over 4 years old. Nobody, including me, complains, or really even notices.

Does New Hampshire Zag When Iowa Zigs?

Both of the winners of Iowa didn't do nearly as well in New Hampshire. In Huckabee's case that was a foregone conclusion, I know. But still I wonder if there isn't a little bit of willfulness in the NH primary voter...if NH results fall in line with those from Iowa, doesn't that make NH just a little less special? And it seems like NH residents, or at least primary voters, actually, the whole darned state, is quite enamored with their special place in the presidential race.

McDonald's Takes On Starbucks

Similar to my idea for McDonald's to elbow its way into chicken wings.

Future of Health Insurance Benefits?

Why the Present State May Be Unstable

I feel like I can see fault lines that could lead to the collapse of the current American system of employer-provided, group-plan health insurance. The way it works right now, employers typically extend coverage to all qualified employees, as a group. By getting hired and meeting the qualifications ( e.g., full-time), you are automatically eligible for group coverage, without regard to your personal health fundamentals--your desirability as an insurance risk. Because you are part of a group, your risk is blended into that of the group, and the annual claims experience of your group is used to re-adjust the rates each year.

This is unlike other forms of insurance. In other forms of insurance, your risk profile is considered as part of the underwriting decision as whether you are given insurance, and at what rate. Viewed from a social-good, shared risk perspective, this arrangement--whereby a less-healthy person, if they are well enough to get a job with benefits, effectively gets the more-healthy people to share the cost burden--may well be viewed as a good thing. However, when viewed from a pure, economic self-interest perspective, I wonder if it is about to become unstable?
The key thing to know is that medically under-written insurance (e.g., policies purchased by individuals) is typically considerably cheaper than non-medically underwritten, group insurance (the policies purchased by employers). The reason for this is simple--in medically under-written insurance, the high-risk 20% or so of applicants will either be denied, or "up-rated" (charged a higher rate, to account for higher-risk). Assuming some form of an "80-20 rule" applies, by excluding the 20% most undesirable applicants, a huge chunk of the total risk has been removed. Hence, lower rates for the remaining 80% of healthy applicants.
Group vs Individual Plans

For a long time, since World War II, a job "with benefits" was the litmus test for whether a job was a good, career position. Even lower-paid white-collar employees had health benefits as part of their jobs, as did most better-paid union jobs. Few people were in the market for individual health insurance, so it was not marketed heavily, and tended to be expensive, even though it was medically under-written, since the under-writers tended to assume that someone motivated enough to buy their own health insurance might have some expensive condition lurking in their health history.
More recently, however, for various reasons, there has been a growing market for individual health insurance. Now that market has truly come of age, and is being served both in terms of marketing, and pricing. So the large majority of employees who have company-provided benefits would nevertheless be better off if they could receive a credit for the full cost of their health benefits, and instead purchase their own health insurance on the open market.

The way things stand now, however, employers are not about to make such an offer, because doing so would de-stabilize the system. The rational employee would go out and try to get a medically under-written policy. If they succeeded, and the premium were less than the credit being offered, they would take the credit. But for the 20% of less healthy employees, this deal would be a non-starter, so of course they would stick with the group plan. This process of self-selection would then result in the claims experience for the now-small, much less healthy cohort of remaining employees rising, astronomically. So I don't think that the revolution is likely to start with existing large employers.

The Disruptive Force

I think the revolution will begin with start-up companies.

If I were a small knowledge-based company, such as a software or consulting firm, I would be very tempted to try a different approach to health insurance. An approach that could give me both a cost and recruiting advantage. Instead of having a traditional, non-underwritten group plan, I think I would try to partner with an insurer(s) to provide my employees with individual policies. It would take some selling and education to get employees and candidates to understand the value proposition, but, as an employer, if you feel like your core demographic is likely to be pretty healthy, why not press that advantage?
I would pay my employees somewhat more in salary, to make up for the fact that they had to buy their own benefits. But since those benefits would be medically under-written, the overall cost to the employee should be relatively lower. One key aspect of the partnership would be to figure out a way to provide expedited approvals—say within 1 week, for standard cases. No underwriting short-cuts, mind you, just making sure the process is very efficient, and little time is lost to waiting in work queues. To make this work, it would be important to match the time for approval to the same kind of timescale that might be expected for acceptance of an offer of employment.
Another aspect to the partnership would be education. Employees are notoriously conservative and gun-shy about their health insurance. So there would have to be some education involved in making sure they see how this is a mutually beneficial arrangement. I think that having an arms-length partner, in the form of an insurance company, would be helpful in performing that employee education. There really are some significant advantages for the employee:

1. 
   Net-net, the employees are sharing in the economies of this system, in the form of higher salaries that more than offset the cost to them to buy their health benefits.
   
   
2. 
   Guaranteed-renewable individual insurance is theirs, and nobody can take it away from them, as long as they pay their premiums. So if their spouse gets cancer, and they get laid off, or want to start their own business, they never need lose a minute of sleep over health insurance concerns complicating those other life decisions.
   
   
   
3. 
   The individual business risk pool is much larger than for any one company, so they don't have to worry that their premiums will go up unexpectedly due to one or two very sick co-workers.
   
   

#2 is big. Once a person gets their minds around this, it turns individual insurance into a very desirable thing. In fact, it would be a modest additional source of employment advantage--if other employers don't offer the same deal, the employee who wanted to change employers would have to either give up their individual policy, or suffer the intolerable penalty of essentially paying twice for the same insurance.

The most obvious downside for the employer would be losing out on candidates who do not qualify for medically under-written insurance. But since that number is typically only about 20% of applicants, it isn't a huge penalty to incur. Moreover, considering that those 20% are presumably much more likely to miss work for health-related problems, then viewed from a very mercenary point of view, it doesn't seem like too high a price.
So it seems to me that this revolution would start, like many social revolutions, rather quietly. A few small startups would be pursuing this strategy. But over time, some of those startups would grow larger. Eventually, their established, traditional competitors would inevitably become aware of the cost advantage enjoyed, and would be pressured to react. Once started, I think the trend would become hard to stop. For a quick comparison of a different, but snow-balling compensation trend, think about the disappearance of traditional, guaranteed-benefit pensions.

Tax Considerations

A partial impediment to this is tax implications. Employer-sponsored health insurance is purchased with pre-tax dollars. Privately purchased health insurance does not inherently provide for a comparable tax break, unless the purchaser is not self-employed and incorporated. President Bush did propose that extending that very tax benefit to all purchasers of private health insurance, but it didn't get put into law. It is still on the agenda of some conservatives, though. In the meantime, there are partial measures which would probably work pretty well for the situation I am describing, namely medical FSAs and HRAs.

Afterword
The above is analysis, not a policy editorial. I don't know if it this development would be a "good" thing or not. I just think it may happen.


Postscripts

Cory Doctorow and Glenn Reynolds--not normally on the same side--both think the de-coupling of insurance from employment would be a good thing for innovation.
I heard some kind of panel interview piece on NPR where the conservative guy was also advocating de-coupling.
Update

It seems possible that the drumbeat for reform will change conditions on the ground, rending this prediction obsolete.