Brooks Mendell

Writer, Teacher and Forestry Professional

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CategoryThinking/Analysis

Ode to Weighted Averages

May 9, 2023 / / 2 Comments

Several years ago, in the essay Average is the Enemy, I wrote about the “false shortcuts offered by averages” for making decisions. Averages give a sense for where the middle lies within a group. They offer a starting point for understanding a situation but, like stereotypes, are incomplete and can mislead. 

Mathematically, averages specify the arithmetic mean. Calculating an average represents one of many approaches for profiling data when conducting analysis. In fact, averages themselves come in different forms. When conducting forest industry research, my team at Forisk often uses rolling and weighted averages to address different issues and better leverage underlying data. 

Rolling Averages

A rolling, or “moving,” average provides a way to measure trends over time. This can be useful when studying the status of a situation from daily, weekly, or monthly data, such as housing starts, health trends, and the economics of different businesses. For example, in the forest industry, the COVID-19 pandemic initiated two years of extreme volatility with softwood lumber prices. Indexed monthly prices increased 71% in mid-2020 before resetting and spiking to an all-time high in mid-2021 and resetting and cycling steeply again in 2022 before, relatively speaking, stabilizing.

When evaluating product margins over time, we want to avoid over-exposure to outliers or random spot prices, such as when lumber exceeded $1,500 per thousand board feet (MBF) in mid-2021. A rolling average cuts a path through the cycle to “smooth out” reported prices while still including the most recent data. In this way, we might apply the last three, six or twelve-month average lumber price to fairly assess the break-even and potential profitability of a business or sector.

Overall, a rolling average provides a practical way to readily communicate insights from simple data series. The Economist calls them, “Among the unsung heroes of statistical methods…” I agree.

Weighted Averages

A weighted average accounts for the relative importance of certain aspects of the data. This differs from a simple average, which treats all observations in a data set equally. In this way, and depending on the question asked, a weighted average can improve our use of available data.

Consider another forest industry example. In 2022 in the U.S. South, the four-quarter rolling average price of pine sawtimber, the logs bought by sawmills to produce the softwood lumber used for homebuilding, was $27.79 per ton according to data from TimberMart-South. This number is a simple average of 11 state-level prices, from Texas to Virginia and down to Florida. However, when we weight those prices by log use (volume) by state, we get $28.59 per ton. 

The difference reflects how higher volume states with more sawmills and higher lumber production levels reported higher log prices and vice versa. For example, Georgia, with a 2022 average price of $33.43, consumed around 13 million tons of pine sawtimber in 2022, while Virginia reported a price of $21.17 while using around 3 million tons of sawtimber over the same period. 

We can also combine approaches to calculate a rolling weighted average. This will better reflect the state of the sawtimber market and the value of wood delivered regionally over time.

Conclusion

Systematic exploration of a situation benefits greatly from the proper, context-appropriate application of available tools and methods. The calculation of an average is, of itself, an agnostic act. However, its ability to clarify depends on the underlying data and question being asked. Rolling and weighted averages, and their combination, offer ways to improve our understanding of a given situation.

Clean Over Current

March 19, 2023 / / 0 Comments

As leaders, parents, investors, and coaches, we often make decisions with imperfect and incomplete information. Therefore, we benefit by having an approach or philosophy for dealing with uncertainty. When screening and evaluating analysis, I start by confirming that what we have in hand is clean and accurate. Building a history of clean, error-free, detail-oriented work builds trust and puts you in a better position to influence decisions and lead the room.

Errors Inject Doubt

For strategic questions and market projections, I prefer clean data and analysis over rushed, subjective intel. Ideally, we have both, but if given the choice, I want things clean, with an “as of” date, over speculation on today’s unconfirmed events. It’s how we report things at Forisk, since we, like many market analysts, rely on government data and other sources that often lag actuals by weeks, months, or quarters, and this data often gets revised in future months. 

If the report I have has multiple errors, then I doubt everything it contains. If it’s clean but a little behind, we can still make decisions and assess performance. We can also evaluate the likelihood and implications of the most recent market intel when it comes in. Without a clean, verified understanding of historical events, we are poorly positioned to evaluate new theses or announcements. However, with a clean dataset and framework, we can develop intuition and scenarios on how changes affect the market and our clients.

Understand How Things Work on the Ground

When conducting forest industry analysis, teams I work with are mindful of the fact that “operations come first” to truly understanding how things function on the ground. If our analysis and understanding is inconsistent with what mill managers or procurement foresters see, then we have something to reconcile. In our role, we add value by connecting information across markets and over time, which prioritizes clean analysis to make our work credible for clients who need to make decisions. 

If we hear a piece of market intel that could change our thinking, we call local contacts working in the field and ask, “is this true? How could this affect you?” As with many things, news is often a rumor, and the impact is regularly overstated. 

Conclusion

There are situations and occupations where the most recent intel has more value, such as on the battlefield, in the operating room, or at the trading desk. However, for strategic questions and projections, and given the choice, I’ll take clean over current.

Four Ways to Strengthen Non-Fiction Writing

January 22, 2023 /

This post introduces an essay on improving the clarity and power of blogs, essays, and articles. 

My go-to resources for writing advice include books such as The Elements of Style by Strunk and White and On Writing by Steven King. (My two-phrase summary of The Elements of Style would be “Omit needless words; let every word tell!”)

In this 700-word essay, I summarize years of reading, writing, revising, and editing into four guidelines intended to help you strengthen the sharing of your ideas and analysis, through the written word, with others. The ultimate aim is to dispense with the garnish and deliver the meat. Clear writing communicates clarified thinking. 

Click here to read the essay.

Information Overload: Brains and Homo Sapiens

August 21, 2022 /

We share the brain of our ancestors. The humans of one hundred thousand years ago, as they started migrating from Africa, toted between their ears brains similar to the ones we carry today.[1] The average homo sapiens on the street, with a comparable mental engine to our own, was simply at a different phase in the collective understanding of how things worked. They cut with sharpened stones while we etch with lasers. They hunted and gathered while we order online. They walked while we drive.

Today, we have a different challenge. Rather than make our way with roughhewn tools and limited knowledge, we flounder under an avalanche of information when making decisions. The sources of the information, from social media to corporate advertisers to political campaigns to entertainers, are incented to produce a flood of content, and they do so with a jovial disregard for the implications on our mental or community health. It’s a numbers game that requires capturing and retaining monetizable volumes of eyeballs and attention.

In 1971, Nobel Prize winning economist Herbert Simon wrote, “What information consumes is rather obvious. It consumes the attention of its recipients. Hence a wealth of information creates a poverty of attention.” 

“What information consumes is rather obvious. It consumes the attention of its recipients. Hence a wealth of information creates a poverty of attention.”

Herbert Simon

The implication from Simon’s observation is that the pain of dealing with this information overload falls on us. And we are not well-prepared for the task. We share the scarcity mentality of our ancestors, who scavenged for food and knowledge, while we live lives of relative and absolute abundance. We hoard and consume and struggle to manage inboxes. We stuff offsite storage facilities with so many “precious” belongings that they could furnish a small planet.  We are simply not that good at sifting, sorting, and deleting.

Anything we can do teach our children and ourselves how to filter and capture useful information, to appreciate the fertile nature of how lessons in one area may enhance our ability to understand things in another, the more we advance positive self-care, confidence, and our collective ability to learn. In this way, we prepare our minds for navigating and battling the overwhelming noise of a chaotic world.

In future posts, I will focus on the personal “growth rings” of learning, thinking, and communicating.

[1] S. Neubauer, J.-J. Hublin, P. Gunz, The evolution of modern human brain shape. Science Advances. 4, eaao5961 (2018). Available at: https://www.science.org/doi/10.1126/sciadv.aao5961

Ten Observations of Human Behavior and Learning

June 18, 2022 /

As a writer, I read a lot of books and articles, listen closely to how people talk, and take notes to capture ideas, lunch orders, and fun phrases. Here are ten observations and quotes from my scribblings with thoughts on how or why I found each to be helpful (or incomplete).

  1. Often, there is a “better” way to do things. It doesn’t really matter if you put your pants on with the leg left first or the right, but it is easier to put your pants on before your shoes. Early in my forestry career, I attended a “total quality management” workshop and Wayne, the instructor, drove home the point that there is often a “best” or “better” way to do a job, no matter your preference. “That’s called a good process. We’ve figured out better ways to use a chainsaw or drive truck, ways that are safer and more productive, so master those.” 
  2. A former Navy officer turned forest industry manager told me “As long as you have a cup of coffee in your hand or are carrying a clipboard, nobody makes you do anything.” In my experience, this reality holds up remarkably, unfortunately well.
  3. “The only real security we have is the certainty that we’re equipped to handle whatever happens to us.” I noted this quote after reading “Beyond Survival”, a book I’ve discussed before, by former Vietnam POW Gerald Coffee. This speaks to the importance of competence, self-awareness, and resilience. 
  4. Fill your days with activities that excite you. This is simply good advice. While we all have responsibilities and obligations, we can also have hobbies, friends, service, and work that, for at least part of each day, energize us. And if this is not the case, whose fault is that?
  5. “Self-trust is the first secret to success.” So said Ralph Waldo Emerson. The quote speaks to both the power of being comfortable in our own skin and the destructive nature of persistent self-doubt, anxiety, and insecurity, which all differ from humility. Having self-awareness and self-trust means you know how to handle yourself in most situations (see #3 above). 
  6. “Kind words can be short and easy to speak, but their echoes are truly endless.” – Mother Teresa.
  7. Avoid leaving good habits to chance. Since we are what we regularly do, we gain by scheduling and ritualizing productive habits, such as sleep, exercise, and date night to help reduce and crowd out less helpful activities, such as scrolling and stewing on social media.
  8. When we deal in specifics, we rarely fail. On the other hand, we rarely succeed when dealing in generalities. As an analyst, writer, and human, I find unsubstantiated, broad-based assertions to be extremely unhelpful.
  9. Learning is spaced repetition. I hold this belief as ironclad: we can get better at anything we practice regularly. However, since becoming a passable juggler and failing (so far) at piano, I observe that, while accurate, the lesson is incomplete. In addition to regular practice, we learn when (1) truly interested and (2) having sufficient understanding to “self-correct” basic errors. Once you learn enough to self-correct, you can become proficient at just about anything.
  10. Many things are more complicated and nuanced than we think. I find it helpful to acknowledge that (1) most decisions are made without certainty and (2) any increase in knowledge can (ironically) further increase uncertainty as it lays bare potential gaps in our understanding. As such, strong emotions, broad generalizations (see #8), and a failure to embrace proven approaches (see #1) can unnecessarily burden decisions. Embrace the idea that we’re doing the best we can with the information we have. Nothing is certain. As new information comes to light, we can adjust. 
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