tag:blogger.com,1999:blog-39710338492663495592024-03-14T11:49:24.347-07:00Seeking QuestionsJohn Wentworthhttp://www.blogger.com/profile/00325384976320984888noreply@blogger.comBlogger62125tag:blogger.com,1999:blog-3971033849266349559.post-21965588609472248032018-04-11T11:55:00.000-07:002018-04-11T11:55:59.456-07:00Blog Moving; What to Read HereI've finally become tired enough of Blogger's terrible interface to write elsewhere. For now, I'm posting <a href="https://medium.com/@johnwentworth">on Medium</a> and <a href="https://www.lesserwrong.com/users/johnswentworth">on Lesswrong</a> (mostly crossposting the same stuff to both).<div>
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If you're here looking for my older writings, here's an overview of what I consider the best posts on this blog. They are ordered chronologically within categories. If you're only going to read one, go with either <a href="http://seekingquestions.blogspot.com/2017/10/from-personal-to-prison-gangs-enforcing.html">From Personal to Prison Gangs</a> or <a href="http://seekingquestions.blogspot.com/2017/03/four-parables-one-lesson-broken-chain.html">The Broken Chain Problem</a>.</div>
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<u>Posts on How the World Works</u></div>
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<li><a href="http://seekingquestions.blogspot.com/2016/03/theory-of-extreme-wealth.html">Theory of Extreme Wealth</a>: High-wealth occupations mainly solve coordination problems.</li>
<li><a href="http://seekingquestions.blogspot.com/2016/10/rich-people-pay-consumption-tax.html">Rich People Pay Consumption Tax</a>: Running a business gives a person de-facto tax options which cannot be changed by any reasonable tax code.</li>
<li><a href="http://seekingquestions.blogspot.com/2017/02/coordination-economy.html">Coordination Economy</a>: The main economic bottlenecks across most industries most of the time are coordination problems.</li>
<li>College Costs, <a href="http://seekingquestions.blogspot.com/2017/03/accounting-for-college-costs.html">part I</a> and <a href="http://seekingquestions.blogspot.com/2017/05/college-costs-part-ii.html">part II</a>: I follow the money to find the root cause of college cost growth, and find a cambrian explosion in course topics driving small class sizes.</li>
<li><a href="http://seekingquestions.blogspot.com/2017/10/from-personal-to-prison-gangs-enforcing.html">From Personal to Prison Gangs</a>: Increased regulation, litigation, licensing, credentialism, stereotyping and tribal identity are all driven by community growth.</li>
<li><a href="http://seekingquestions.blogspot.com/2017/11/post-scarcity.html">Post-Scarcity</a>: "Post-scarcity" worlds, as we usually think of them, will still have scarcity in the form of signalling goods, and developed countries are already most of the way to such a world.</li>
<li><a href="http://seekingquestions.blogspot.com/2017/11/computational-limits-of-empire.html">Computational Limits of Empire</a>: Pre-modern empires tend to max out around 60M people. The US hit 60M around 1890 - right when IBM was created to handle the census.</li>
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<u>Political or Semipolitical Posts</u></div>
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<li><a href="http://seekingquestions.blogspot.com/2015/11/the-problem-with-atheism-by-atheist.html">The Problem with Atheism</a> and <a href="http://seekingquestions.blogspot.com/2015/11/the-value-of-religion-by-atheist.html">The Value of Religion, By an Atheist</a>: Atheists need to accept that religion does offer real value, God or no, and change messaging to say "look, you can still get this value even without God existing per se".</li>
<li><a href="http://seekingquestions.blogspot.com/2016/11/how-to-implement-national-popular-vote.html">How to Implement a National Popular Vote</a>: Could probably be done by half a dozen people working full-time for a year.</li>
<li><a href="http://seekingquestions.blogspot.com/2017/03/refutation-of-summers-hypothesis-for-cs.html">Summers' Hypothesis</a>: Summers' hypothesis seeks to explain the STEM gender gap by the difference in IQ variance across genders. I got so tired of seeing people incorrectly "refute" this by looking at means (not variances) that I decided to run some numbers myself.</li>
<li><a href="http://seekingquestions.blogspot.com/2017/04/the-immigrant-superbug-parable-of.html">The Immigrant Superbug</a>: A parable of science and politics.</li>
<li><a href="http://seekingquestions.blogspot.com/2017/06/prerequisites-for-universal-basic-income.html">Prerequisites for UBI</a>: Universal basic income would be great in a sufficiently post-scarcity economy, but what exactly does "sufficiently post-scarcity" mean? This post answers.</li>
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<u>Other Posts</u></div>
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<li><a href="http://seekingquestions.blogspot.com/2015/09/kosher-hot-dogs.html">Kosher Hot Dogs</a>: Religious restrictions can create real market value.</li>
<li><a href="http://seekingquestions.blogspot.com/2016/12/what-signalling-feels-like.html">What Signalling Feels Like</a>: Guess post, title says it all.</li>
<li><a href="http://seekingquestions.blogspot.com/2017/03/four-parables-one-lesson-broken-chain.html">The Broken Chain Problem</a>: Unifying principle behind four parables.</li>
<li><a href="http://seekingquestions.blogspot.com/2017/06/be-more-evil.html">Be More Evil</a>: In the movies, Good is Dumb. So when real-world people try to act good, they mostly end up acting dumb.</li>
<li><a href="http://seekingquestions.blogspot.com/2017/06/the-scientific-bottleneck.html">The Scientific Bottleneck</a>: The main bottleneck to progress across multiple scientific fields is a lack of mathematical theory for adaptive systems.</li>
<li><a href="http://seekingquestions.blogspot.com/2017/10/whats-point-of-capital-markets.html">What's the Point of Capital Markets?</a>: Under what circumstances does trading in capital markets generate positive-sum gains, versus zero-sum gambles?</li>
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John Wentworthhttp://www.blogger.com/profile/00325384976320984888noreply@blogger.com0tag:blogger.com,1999:blog-3971033849266349559.post-11196331458547578232018-02-21T10:36:00.000-08:002018-02-21T10:36:26.356-08:00John's Tips for Low-Effort Housekeeping<div>
Many people out there are endlessly fascinated with organizing things into shelves, boxes, and shelves within boxes. Some of them write blog posts about the joy of organizing their living spaces.</div>
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I am not one of those people. This post suggests a couple ideas for people who think folding laundry is a waste of time, and who like to “clean” by picking up everything on the table and dropping it in a pile somewhere else.</div>
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<u>Two-Hamper Technique</u></div>
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I’m sure we’ve all wondered, at some point in our lives, why people fold laundry. You’re just going to unfold it again as soon as you use it! What’s the point?</div>
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To be fair, folded clothes are more convenient for storage - they fit better, and are easier to sift through. On the other hand, I only use a fraction of my clothes on a regular basis. I’m perfectly willing to accept somewhat less efficient storage for those clothes, in exchange for not having to fold them.</div>
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I present: the two-hamper technique. Clean clothes go in one hamper. Dirty clothes go in the other hamper. On laundry day, the dirty hamper is dumped into the washer, wash, dry, and dryer is emptied into the clean hamper. No folding required.</div>
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I keep less often-used clothes folded or hanging in the closet. They don’t take up hamper space, and since they’re rarely used, the overhead to fold them is minimal.</div>
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I’ve also tried a few ways to generalize the two-hamper technique to other areas, but they haven’t worked out. Dishes are a good example - keeping dirty dishes in the sink and clean dishes in the dishwasher failed for multiple reasons. First, when I use dishes, I use too broad a variety of dishes to fit all of them in the dishwasher - whereas all the clothes I regularly wear do fit easily in one hamper. Second, I usually don’t use dishes at all - I mostly go out to eat. When I put dirty dishes in the sink, they end up sitting there growing unpleasant. I eventually just switched to disposables, which suit my infrequent use much better.</div>
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<u>Recency Cache and Cleaning</u></div>
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From time to time I used to wish I had room to work at my desk, rather than covering literally all of it with stacks of paper, folders, and random objects.</div>
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One day it dawned on me: this is a caching problem.</div>
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I gave various surfaces in my apartment different cache levels:</div>
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<li>L0 is table and desk</li>
<li>L1 is bookshelf and counter</li>
<li>L2 covers cabinets (lower shelves are L2a, upper are L2b)</li>
<li>L3 is the black hole, a.k.a closet.</li>
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When I want to clean something, I simply empty all of its contents into the next higher cache. For instance, to clean my desk, I literally pick up all the shit on my desk and move it to the counter. That’s it. Done.</div>
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Then, time passes. As I use things, I put them down wherever is convenient, which usually means L0 or L1. Pretty soon, the things which I use most often have migrated back to convenient low-numbered cache locations. Things I never use gradually move to higher and higher numbered locations, until they get buried in the closet, leaving behind space for more oft-used items.</div>
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This has worked pretty well so far.</div>
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The main hiccup was that I realized a second use case for high-priority cache locations. It isn’t just about making things easy to retrieve. I also leave things on my desk as a reminder to look at them later or to check them regularly. In retrospect, this never worked very well. After noticing this use-case, I’ve started looking for more effective (but still non-intrusive) ways to handle such reminders.</div>
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John Wentworthhttp://www.blogger.com/profile/00325384976320984888noreply@blogger.com0tag:blogger.com,1999:blog-3971033849266349559.post-75342280687238991442018-01-22T18:29:00.000-08:002018-01-22T18:32:28.512-08:00Trump 1-yr RetrospectiveShortly after Trump’s election, I wrote a few pieces on the subject, including “Why I Like Trump… AND Hillary” and “What Might Trump Actually Do?”. Both of these included predictions, so it’s time to evaluate how those predictions played out.<br /><u><br />Qualitative Expectations</u><br />My main argument in favor of Trump was:<br />“If ever there was a complete huckster, a con-man who is master at the art of schmoozing and suckering, it's Trump. One of the two things that I really like about a Trump presidency is that there's no way in hell this guy is keeping his campaign promises. [...] The other thing I really like about Trump is that he has an established reputation for bringing in the most competent people to do the actual work. [...] if Trump's presidency goes anything like I expect, he'll be offloading all the work to extremely competent people, and he'll spend his time going around blustering and bullshitting and generally telling the public whatever they want to hear. In the best case, the competent people will get a great deal of freedom to do what needs to be done, while Trump bullshits the media.”<br /><br />Over the past year, I’ve sat down at least four times to write a post saying I was wrong about Trump and he’s an awful president. Every time, I started by re-reading the above. And every time, I thought “actually, that’s mostly still true”. In every case, Trump was doing something really awful under a huge media spotlight… but ultimately with little impact. (Most notable examples are the Muslim travel ban and the trans military ban, both of which withered away in court.)<br /><br />That said, I definitely got some parts wrong. Even without explicitly predicting much competence from Trump himself, I still overestimated his general competence and underestimated his awfulness. The trans military ban in particular was completely indefensible, even if it ultimately had little impact other than a media circus. Also, covfefe.<br /><br />On the “hiring competent people front”, six months ago I was totally ready to admit that didn’t happen. But since then, the incompetent people have largely been fired - most notably Bannon. Tillerson’s great, Kelly’s great, Mnuchin’s solid, Gorsuch’s stellar. I don’t like Sessions, but I can’t fault his competence (and I’m sure many of you would say the same for some of the other names I’ve listed). It’s still not 100%, but overall, the “Trump serves as media shit umbrella while competent people do their thing” model seems to be up and running.<br /><u><br />Specific Prediction Performance</u><br />Alright, time to march down the list of more specific predictions from “What Might Trump Actually Do?”. Here were the main predictions, by header:<br /><ul>
<li>Term limits/lobbying/etc. Predictions: no term limits, lobbying & fundraising limits unlikely, hiring and regulation freezes plausible. Result: no term limits, no lobbying & fundraising limits, hiring and regulation freezes both happened. </li>
<li>Trade, jobs, EPA. Predictions: abandoning TPP and renegotiating NAFTA were plausible, and cutting various environmental regulations and funding was likely. Result: NAFTA is still on hold, but this stuff has mostly happened. </li>
<li>Immigration & Misc. Predictions: pro-judicial-constraint, mostly ignore abortion & gay marriage, lots of noise but not much substantive change on immigration. Result: judicial appointment specifically known for “textualism”, mostly ignored abortion & gay marriage, mostly noise on immigration so far. </li>
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To be fair, I hedged by not giving numerical probabilities for these. Overall, things I found “unlikely” didn’t happen, things I found “plausible” or “likely” almost all happened. The biggest single thing I was wrong about was immigration: there’s already been more substantive damage there than I expected, and likely more to come. Even so, “mostly noise” still seems like an accurate description.<br /><br />Next, I had a list of predictions about Trump’s legislative agenda. I won’t go through the whole list - most of them haven’t seen any major bill in Congress, which wasn’t a possibility I accounted for. The big two have obviously been healthcare and taxes; I predicted both of these would be high priorities and would definitely pass with all-Republican president and Congress. Obviously, I was very wrong about one of those, and very right about the other. Overall, I don’t think I outperformed (or underperformed) pundit predictions on the legislative front.<br /><br />Finally, I predicted that Trump wouldn’t do anything particularly awful which wasn’t on the list. The trans military ban proved me wrong on that front, though happily it’s been the one exception to a generally-accurate rule. With that one exception, I think I had a generally accurate idea of what we were in for under a Trump presidency.<br /><br />Main conclusion, one year later: damn, that was a LOT of media noise.<br /><br /><u>Would I do it again?</u><br />At this point… not sure. If you’d asked me a year ago, I would have predicted that Trump would perform worst relative to Hillary over the first year. Hillary’s big advantage was already having the day-to-day president skill set and knowledge base. I expect the worst of Trump has passed, and we’re just now getting to the point where the good parts might shine. We’ll see.<br /><br />John Wentworthhttp://www.blogger.com/profile/00325384976320984888noreply@blogger.com0tag:blogger.com,1999:blog-3971033849266349559.post-45742399815371400702018-01-16T13:03:00.002-08:002018-01-16T14:54:56.222-08:00Perspective<i>There was some trouble posting this earlier; Blogger did something weird to the formatting. It's still not quite right, but I figured having something here is better than nothing, especially for people who use the RSS feed.</i><br />
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The first US census was taken in 1790. Boston, according to the census, <a href="https://en.wikipedia.org/wiki/1790_United_States_Census">housed 18,320 people</a>. The famous <a href="https://en.wikipedia.org/wiki/Battle_of_Bunker_Hill">Battle of Bunker Hill</a>, Boston’s main battle in the American Revolution, saw about 2,400 colonial militia face off against at least 3,000 British redcoats.<br />
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Let’s put that in perspective. In 1970, Kent State University <a href="https://may4archive.org/era.shtml">had about 21,000 students</a> - slightly more than 1790 Boston. The protest which ended with the <a href="https://en.wikipedia.org/wiki/Kent_State_shootings">Kent State shootings</a> drew about 2,000 students.<br />
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So, comparing the Battle of Bunker Hill and the Kent State shootings, we see communities of comparable size, and “rebel” forces of comparable size.<br />
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In 1775, a few strong writers and orators (e.g. Samuel and John Adams) could rile up the entire city of Boston to the point of armed rebellion. Imagine this today - despite the daydreams of protesters and organizers, it seems pretty unlikely that a major city would be driven to arms by politicians and activists. There’s just too many people to reach them all. But in 1775, the entire city if Boston was only as big as a mid-size modern university. The entire community could be riled up by a handful of writers and speakers.<br />
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The comparison between 1775 and today grows even stranger when we think about the battle itself. 2,000 militia - roughly comparable to a campus protest, but with guns - went toe-to-toe with the military of the world’s dominant empire. When the war was over, the student-protesters-with-guns came out ahead, and an entire new nation was founded.<br />
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In 1775, a person, a pen, and a soapbox could make that sort of thing happen. Today, no way. Why? Population growth. When the third largest city in the region is smaller than today’s universities, communities were small enough that a few people could mobilize a large fraction of the population. But as populations grew, the methods which once mobilized tight communities <a href="https://seekingquestions.blogspot.com/2017/10/from-personal-to-prison-gangs-enforcing.html">no longer worked</a>.<br />
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One more piece of perspective, to drive home the point. In the 1790 US census, New York City had a population of 33,131. That’s comparable to today’s Claremont, CA, where I went to college. Claremont isn’t a tiny town - most people don’t know each other. On the other hand, their kids all go to the same high school (Claremont High). That was New York City, the largest city in the US, in 1790: small enough that everybody’s kids would have fit in one modern-day high school.<br />
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Some of the teachers at Claremont High have probably met a majority of the people in Claremont. Shaking hands with everyone in the city is quite feasible, and politicians in 1790 New York probably did just that. <br />
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And that was the largest city in the nation! When Jefferson called the US a nation of small farmers, he wasn’t waxing poetic or fantasizing. The whole nation had 3.9 million people in 1790; the 24 largest cities housed just 0.2 million. 90% of the population worked on farms - I’ll have more to say about this in a future post.John Wentworthhttp://www.blogger.com/profile/00325384976320984888noreply@blogger.com0tag:blogger.com,1999:blog-3971033849266349559.post-3830113130168642272017-12-15T12:07:00.000-08:002017-12-15T14:38:17.562-08:00Bitcoin Future-Spot Divergence<div class="separator" style="clear: both; text-align: center;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-weight: 400; margin-left: 1em; margin-right: 1em; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><img height="225" src="https://lh5.googleusercontent.com/ymVGg1VONWlskV8PonzAQVMm1VnxbvgxCF6EEDKDZsqjzGraaAZeYkDVAvUDnGk3SzioZVnE2E-iWyJfMlxBega35w2N5QJ7ytb6jEBCTkM0dhTFgWN50m6TGP-NkCjACL7PFdVW" style="border: none; transform: rotate(0rad);" width="400" /></span></div>
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<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">As of last night’s close, the price for a January bitcoin future was $1,171.21 higher than the price for a bitcoin. That means anyone could:</span></div>
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<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Buy one bitcoin for about $16,500</span></div>
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<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Sell a bitcoin future for about $17,500</span></div>
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<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Wait until January</span></div>
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<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Sell off the bitcoin and pay off the future contract</span></div>
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<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Pocket over $1,000.</span></div>
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<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">That’s a return of ~6% in just one month, and you can lock it in instantly - once the bitcoin is bought and the future sold, their values will move in tandem, so there’s no risk of losing money. Normally, we expect these kinds of arbitrage opportunities to disappear quickly - especially for assets like bitcoin, which are easy to acquire and cost nothing to store. So why haven’t the prices converged?</span></div>
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<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">If you want to know why an apparent arbitrage opportunity hasn’t disappeared, an easy way to find out is to try to exploit it, and see what stops you.</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">In this case, the main issue is that a bitcoin future is a </span><span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: italic; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">future</span><span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">. Futures require both parties to hold margin: money available to cover their side of the contract as prices move. Usually, margin on a future isn’t huge, since prices aren’t too volatile. But bitcoin? Very volatile. That means very high margin requirements.</span></div>
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<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">As usual, Interactive Brokers has everything you need to know on </span><a href="https://ibkr.info/article/3049" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">one page</span></a><span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">: margin requirement to sell a single bitcoin future is $40,000. Now, that margin can still earn interest while it’s sitting around, so it isn’t a “cost” per se. You don’t need to spend it in order to take advantage of the arbitrage opportunity. But you do need to have it available, and you can only arbitrage one bitcoin per $40,000 available.</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">This is still a pretty good opportunity, but you can only put so much money into it. That explains why small traders aren’t wiping out this arbitrage opportunity. So, next question: why aren’t the usual big institutions arbitraging away that price difference?</span></div>
<b style="font-weight: normal;"><br /></b>
<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Usually, here’s how the situation would play out. A trader would buy a bitcoin and sell a future. Now, the trader would like to repeat this trade in order to make more money. So, the trader would go to a banker and say “hey, I have this low-risk arbitrage opportunity, I’d like to take out a loan collateralized by my one bitcoin in order to leverage my position.” Banks love collateral, so they’d give the trader a loan, and the trader would make the same trade again. Now the trader has another bitcoin, gets another loan, rinse, lather, repeat. In actual practice, many of the middle steps happen automatically, and the whole process is called “leveraging”.</span></div>
<b style="font-weight: normal;"><br /></b>
<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">With bitcoin, this is not so easy. Good luck finding a banker who will make a loan collateralized by bitcoin (i.e., look for a margin account which allows direct bitcoin trading). Even setting aside that issue, a trader would also have to borrow for the futures’ margin requirement. Now, the whole arbitrage together is actually very low risk, so it should be possible in theory to get a loan to do this… but it would require a personal relationship with a banker who understands the nitty-gritty and is willing to dip their toe in untested waters.</span></div>
<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Put it all together, and we have a beautiful, persistent arbitrage opportunity limited by liquidity. It will disappear eventually, but it’s going to take time for the bankers to warm up.</span></div>
John Wentworthhttp://www.blogger.com/profile/00325384976320984888noreply@blogger.com0tag:blogger.com,1999:blog-3971033849266349559.post-72857422443972413792017-12-05T10:34:00.000-08:002017-12-05T10:49:31.736-08:00Lemons, In-Group Signals and Marketing<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-left: 36pt; margin-right: 36pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">“</span><span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Professor Quirrell didn't care what your expression looked like, he cared which states of mind made it likely.” - </span><span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: italic; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Harry Potter and the Methods of Rationality</span><span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">, chapter 26</span></div>
<b id="docs-internal-guid-66afc216-27f6-7d62-2a91-df01d3054394" style="font-weight: normal;"><br /></b>
<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Quick, which slogan will yield more sales:</span></div>
<ul style="margin-bottom: 0pt; margin-top: 0pt;">
<li dir="ltr" style="background-color: white; color: #222222; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">“Be smart, buy X!”</span></div>
</li>
<li dir="ltr" style="background-color: white; color: #222222; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">“Not Your Grandma’s X”</span></div>
</li>
</ul>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Got a guess? Good, remember it.</span></div>
<b style="font-weight: normal;"><br /></b>
<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">This post is going to present some background game theory on signalling, and then talk about what that theory predicts for the slogans above.</span></div>
<b style="font-weight: normal;"><br /></b>
<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">The Lemons Game</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;"><br /></span></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><img height="255" src="https://cdn-images-1.medium.com/max/800/1*NvWwH4yrQ-qK8X6yzLBOig.png" style="margin-left: auto; margin-right: auto;" width="400" /></td></tr>
<tr><td class="tr-caption" style="text-align: center;">What can a used car dealer say to convince you it's <i>not</i> a lemon? (<a href="https://medium.com/@avtarsehra/icos-and-economics-of-lemon-markets-96638e86b3b2">image source</a>)</td></tr>
</tbody></table>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt; text-align: center;">
<span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;"></span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;"><br /></span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Consider a game with two players: a prospective car buyer, and a seller. The seller begins with either a working car or a broken car - a “lemon” - at random (50% chance for each). The seller knows whether or not the car is a lemon, and considers a working car more valuable. So, for instance, maybe the seller is willing to sell only above $10k if the car is working, but will sell a lemon as low as $5k. On the other side, the buyer is willing to pay up to $12k for a working car, or up to $6k for a lemon.</span></div>
<b style="font-weight: normal;"><br /></b>
<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">One little wrinkle: the buyer has no way to check whether or not the car is a lemon before deciding whether to buy. Mechanical problems may not be immediately obvious during a test drive.</span></div>
<b style="font-weight: normal;"><br /></b>
<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">What happens?</span></div>
<b style="font-weight: normal;"><br /></b>
<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Well, think it through from the borrower’s perspective. The car has a 50% chance of being a lemon, a priori. Ignoring risk aversion, a buyer would pay $9k for a 50/50 chance of a working car… but at that price, the seller wouldn’t be willing to part with a working car. So if the buyer offers $9k, then she will only end up with either no sale or a lemon! So, the borrower will only bid somewhere between $5k and $6k in the first place - since she’s only going to get lemons anyway, she only offers enough to buy a lemon.</span></div>
<b style="font-weight: normal;"><br /></b>
<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The sad thing is, you may have an honest seller on one side trying to sell a working car for $11k, and a buyer on the other side who would love to buy a working car for $11k… but the deal won’t happen, because there’s no way for the seller to convince the buyer that the car isn’t a lemon. Anything the seller could say which would convince the buyer, a dishonest seller with a lemon could </span><span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: italic; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">also</span><span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> say.</span></div>
<b style="font-weight: normal;"><br /></b>
<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Cheap Talk vs Signalling</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The lemons game illustrates a key concept: even when you let two people communicate freely, it may be impossible to convey relevant information between them.</span></div>
<b style="font-weight: normal;"><br /></b>
<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">This problem comes up whenever someone might be motivated to bluff. In the lemon game, a seller with a lemon is motivated to bluff - whatever a seller with a working car might say to sell for $11k, the seller with a lemon will also say in an attempt to get $11k for their lemon. Thus the phrase “cheap talk”: talking can’t actually convey any useful information here.</span></div>
<b style="font-weight: normal;"><br /></b>
<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">In the real world, we have various ways around this.</span></div>
<b style="font-weight: normal;"><br /></b>
<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Among the simplest is Carfax: a trusted third party which can tell the buyer whether the car is a lemon. A seller with a working car will happily pay Carfax $50 to certify it. The certified car will then sell somewhere around $11k.</span></div>
<b style="font-weight: normal;"><br /></b>
<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">But barring trusted third parties (Carfax isn’t perfect), how else can a seller signal that their car is not a lemon? Remember, the key here is that it must be something which a seller with a lemon could not, or would not, do!</span></div>
<b style="font-weight: normal;"><br /></b>
<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Another simple answer: offer to cover the cost of any mechanical issues for some time after the sale. That would be expensive for lemon-sellers, so they won’t agree to it. Any seller willing to cover mechanical costs must be selling a working car. This is useful, but it creates a new problem: the buyer will be incentivized not to take very good care of the car, since the seller is covering repair costs anyway. </span></div>
<b style="font-weight: normal;"><br /></b>
<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Here’s a more interesting answer: whenever the car needs repairs, the buyer pays for the repairs and then sends the receipt to the seller. The seller takes enough money out of their bank account to cover the repairs, puts the money in a fireplace, and burns it. As before, this is a bad deal for lemon-sellers, so they won’t agree to it. Only sellers with working cars, expecting few mechanical issues, will agree - ideally, this means little or no money will actually need to be burned! What matters is the seller’s willingness to bet on the quality of the car, which signals the car’s quality to the buyer.</span></div>
<b style="font-weight: normal;"><br /></b>
<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Marketing and In-Group Signalling</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">In the lemons game, the key to effective signalling is that the signal - whether a carfax report, a contract to cover breakdowns, or a contract to burn money in the event of breakdowns - must be very expensive for a lemon-seller, but not very expensive for the seller of a working car. This is critical. Anything which a dishonest lemon-seller could afford to say is cheap talk, and buyers won’t buy cheap talk.</span></div>
<b style="font-weight: normal;"><br /></b>
<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">This has interesting implications for in-group signalling.</span></div>
<b style="font-weight: normal;"><br /></b>
<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Suppose I want to signal to my goth friends that I’m in their boat. So, I put on the most over-the-top outfit I can manage, chains and black makeup, the whole shebang - the key being that such an outfit would definitely </span><span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: italic; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">not</span><span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> fit in any non-goth social circle. (Politics offers better examples, but I don’t want to derail this post.)</span></div>
<b style="font-weight: normal;"><br /></b>
<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">If someone wants to signal their membership in a group, then the best way to do that is with something which would be prohibitively expensive for someone outside the group. In these situations, we’re not usually talking about monetary expense. Instead, the “cost” is in social capital with other groups. In other words: the best way to signal membership in an in-group, is to do something which completely ruins one’s chance with the out-group.</span></div>
<b style="font-weight: normal;"><br /></b>
<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Which brings us to marketing.</span></div>
<b style="font-weight: normal;"><br /></b>
<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Truism: it’s better to have 10% of the population 100% interested in your product than to have 100% of the population 10% interested. Nice heuristic, but the model which usually underlies it in practice is in-group signalling. If you can signal that your product is affiliated with some group, then group members will buy your brand religiously. Apple, converse, starbucks… many a household name has made a fortune on this principle. But the all-important key to an in-group product is that </span><span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: italic; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">it must not target everyone</span><span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">. Like the lemons game, if anyone can send the signal, if the signal is no more expensive for the out-group than for the in-group, then the signal is not a signal at all - it’s just cheap talk. Signals must cost something.</span></div>
<b style="font-weight: normal;"><br /></b>
<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">If you want to signal that your product is great for <in-group>, then the best way to do that is to offend <out-group>. The more blatant, the better. “Duck Dynasty” figured this out better than most, and gathered a truly ridiculous following for a show which could generously have been called a non-entity. Part of the key to Starbucks’ success, is all the people who hate it and hate everything a $5 coffee stands for. That’s the beauty of it: offend the out-group’s sensibilities, and you send a strong signal of in-group status. It’s the equivalent of offering to burn money if the car breaks down. (Just make sure to pick an actual in-group first; offending random people is no more useful than randomly burning money!)</span></div>
<b style="font-weight: normal;"><br /></b>
<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Let’s say, hypothetically, you want to get young people to use product X. Easy tagline: “Not Your Grandma’s X”. Conversely, for targeting less-young people, “X for Grownups”, ideally delivered with an ad making fun of teenagers for being idiots (I remember a great Old Spice campaign along these lines). Humans have great intuition for this sort of thing: we see our outgroup mocked, and automatically assume that the mocker is “on our side”.</span></div>
<b style="font-weight: normal;"><br /></b>
<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">A few other ideas, to convey the flavor:</span></div>
<ul style="margin-bottom: 0pt; margin-top: 0pt;">
<li dir="ltr" style="background-color: white; color: #222222; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">“Moms love X!”</span></div>
</li>
<li dir="ltr" style="background-color: white; color: #222222; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">“The X for people who like trucks”</span></div>
</li>
<li dir="ltr" style="background-color: white; color: #222222; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">“X: for true <sports team> fans only”</span></div>
</li>
</ul>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Note that these don’t always “offend” the outgroup per se; but they do all but guarantee that nobody in the out-group will ever buy your product. Indeed, the more they discourage out-group members from buying the product, the better they work. Non-moms will almost never buy “X for moms”. By way of contrast, consider a useless slogan like “Be smart, buy X!”. Everyone wants to be smart! Unless your advertising manages to convey a very group-identity-loaded concept of “smart”, enough to actually turn away non-”smart” consumers, it’s going to come off as generic cheap talk and fail to tap into any identity at all.</span></div>
<b style="font-weight: normal;"><br /></b>
<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The takeaway:</span></div>
<br />
<ul style="margin-bottom: 0pt; margin-top: 0pt;">
<li dir="ltr" style="background-color: white; color: #222222; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Signalling should be costly to fake; otherwise it’s just cheap talk.</span></div>
</li>
<li dir="ltr" style="background-color: white; color: #222222; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">In the case of in-group signalling, the “cost” is usually to push away out-group members.</span></div>
</li>
<li dir="ltr" style="background-color: white; color: #222222; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Humans have strong intuition for this stuff.</span></div>
</li>
<li dir="ltr" style="background-color: white; color: #222222; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">In-group-specific marketing should push away people not in the group.</span></div>
</li>
<li dir="ltr" style="background-color: white; color: #222222; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: white; color: #222222; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">More generally, in marketing, any signal which costs only ad spend dollars will be seen as cheap talk - ad spend is cheap for fakers.</span></div>
</li>
</ul>
John Wentworthhttp://www.blogger.com/profile/00325384976320984888noreply@blogger.com2tag:blogger.com,1999:blog-3971033849266349559.post-23184081809798143102017-11-22T17:35:00.001-08:002017-11-22T17:35:58.798-08:00Computational Limits of Empire<span style="font-family: Arial; font-size: 12pt; white-space: pre-wrap;">The tabulation of the 1880 US census took 8 years to complete. As preparation began for the 1890 census, it was estimated that tabulation would not be complete until after the 1900 census began! The computational load was declared to be too great; an alternative approach was needed.</span><br />
<span id="docs-internal-guid-918ecf03-e683-4a11-5aac-9efc72d4db3b"><br /><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">The problem was solved by a mechanical computer based on punch cards. A company was founded specifically to build the contraption; that company would later become IBM.</span></div>
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<span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">I was thinking about this story, and I wondered: just how large was the US population in 1890? Did other nations reach that population level before? How did they handle the problem?</span></div>
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<span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">The 1890 US census counted 63M people, in total (</span><a href="https://fusiontables.google.com/DataSource?dsrcid=225439" style="text-decoration-line: none;"><span style="color: #1155cc; font-family: Arial; font-size: 12pt; text-decoration-line: underline; vertical-align: baseline; white-space: pre-wrap;">source</span></a><span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">). How large did the Roman empire grow? Well, the Roman empire seems to have reached its peak around… 60M people. At this point I really started to get suspicious, and looked up population statistics for the ancient Persian empire and the Chinese empires. 50M people for the Achaemenid empire (Persian). China had 30-85M under the Han dynasty, stabilized around 50M for a few centuries, then grew from 45 to 80M under the Tang dynasty.</span></div>
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<span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">Next, I pulled up </span><a href="https://en.wikipedia.org/wiki/List_of_largest_empires" style="text-decoration-line: none;"><span style="color: #1155cc; font-family: Arial; font-size: 12pt; text-decoration-line: underline; vertical-align: baseline; white-space: pre-wrap;">wikipedia’s list of largest empires</span></a><span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;"> and </span><a href="http://www.businessinsider.com/the-10-greatest-empires-in-history-2011-9/" style="text-decoration-line: none;"><span style="color: #1155cc; font-family: Arial; font-size: 12pt; text-decoration-line: underline; vertical-align: baseline; white-space: pre-wrap;">Business Insider’s list of top 10 greatest empires</span></a><span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">. I had to google around for population stats, many of which were not immediately available, but here are the big ones, excluding empires from 1700 or later:</span></div>
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<li dir="ltr" style="font-family: Arial; font-size: 12pt; list-style-type: disc; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">Rome, 60M (</span><a href="https://en.wikipedia.org/wiki/Demography_of_the_Roman_Empire" style="text-decoration-line: none;"><span style="color: #1155cc; font-size: 12pt; text-decoration-line: underline; vertical-align: baseline; white-space: pre-wrap;">https://en.wikipedia.org/wiki/Demography_of_the_Roman_Empire</span></a><span style="font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">)</span></div>
</li>
<li dir="ltr" style="font-family: Arial; font-size: 12pt; list-style-type: disc; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">China, 30-85M (Han), 50M, 45-80M (Tang) (</span><a href="https://en.wikipedia.org/wiki/Demographics_of_China" style="text-decoration-line: none;"><span style="color: #1155cc; font-size: 12pt; text-decoration-line: underline; vertical-align: baseline; white-space: pre-wrap;">https://en.wikipedia.org/wiki/Demographics_of_China</span></a><span style="font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">)</span></div>
</li>
<li dir="ltr" style="font-family: Arial; font-size: 12pt; list-style-type: disc; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">Abbassid caliphate, 50M (</span><a href="https://simple.wikipedia.org/wiki/Abbasid_Caliphate" style="text-decoration-line: none;"><span style="color: #1155cc; font-size: 12pt; text-decoration-line: underline; vertical-align: baseline; white-space: pre-wrap;">https://simple.wikipedia.org/wiki/Abbasid_Caliphate</span></a><span style="font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">)</span></div>
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<li dir="ltr" style="font-family: Arial; font-size: 12pt; list-style-type: disc; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">Umayyad caliphate, 62M (</span><a href="https://en.wikipedia.org/wiki/Umayyad_Caliphate" style="text-decoration-line: none;"><span style="color: #1155cc; font-size: 12pt; text-decoration-line: underline; vertical-align: baseline; white-space: pre-wrap;">https://en.wikipedia.org/wiki/Umayyad_Caliphate</span></a><span style="font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">)</span></div>
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<li dir="ltr" style="font-family: Arial; font-size: 12pt; list-style-type: disc; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">Achaemenid (a.k.a. Persian), 50M (</span><a href="https://en.wikipedia.org/wiki/List_of_largest_empires#Largest_empires_by_percentage_of_global_population" style="text-decoration-line: none;"><span style="color: #1155cc; font-size: 12pt; text-decoration-line: underline; vertical-align: baseline; white-space: pre-wrap;">https://en.wikipedia.org/wiki/List_of_largest_empires#Largest_empires_by_percentage_of_global_population</span></a><span style="font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">)</span></div>
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<li dir="ltr" style="font-family: Arial; font-size: 12pt; list-style-type: disc; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">Yuan dynasty, 60M (</span><a href="http://www.businessinsider.com/the-10-greatest-empires-in-history-2011-9/#the-umayyad-caliphate-used-its-reach-to-spread-islam-4" style="text-decoration-line: none;"><span style="color: #1155cc; font-size: 12pt; text-decoration-line: underline; vertical-align: baseline; white-space: pre-wrap;">http://www.businessinsider.com/the-10-greatest-empires-in-history-2011-9/</span></a><span style="font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">)</span></div>
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<li dir="ltr" style="font-family: Arial; font-size: 12pt; list-style-type: disc; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">Spanish empire, 68M (</span><a href="http://www.businessinsider.com/the-10-greatest-empires-in-history-2011-9/#the-umayyad-caliphate-used-its-reach-to-spread-islam-4" style="text-decoration-line: none;"><span style="color: #1155cc; font-size: 12pt; text-decoration-line: underline; vertical-align: baseline; white-space: pre-wrap;">http://www.businessinsider.com/the-10-greatest-empires-in-history-2011-9/</span></a><span style="font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">)</span></div>
</li>
<li dir="ltr" style="font-family: Arial; font-size: 12pt; list-style-type: disc; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">Mongols, 110M, one generation only (1270-1309) (</span><a href="http://www.businessinsider.com/the-10-greatest-empires-in-history-2011-9/#the-umayyad-caliphate-used-its-reach-to-spread-islam-4" style="text-decoration-line: none;"><span style="color: #1155cc; font-size: 12pt; text-decoration-line: underline; vertical-align: baseline; white-space: pre-wrap;">http://www.businessinsider.com/the-10-greatest-empires-in-history-2011-9/</span></a><span style="font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">)</span></div>
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<li dir="ltr" style="font-family: Arial; font-size: 12pt; list-style-type: disc; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">Mauryan Empire, 50M (</span><a href="http://www.newworldencyclopedia.org/entry/Maurya_Empire" style="text-decoration-line: none;"><span style="color: #1155cc; font-size: 12pt; text-decoration-line: underline; vertical-align: baseline; white-space: pre-wrap;">http://www.newworldencyclopedia.org/entry/Maurya_Empire</span></a><span style="font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">)</span></div>
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<li dir="ltr" style="font-family: Arial; font-size: 12pt; list-style-type: disc; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">Seleucid, 30M (</span><a href="https://en.wikipedia.org/wiki/Classical_demography" style="text-decoration-line: none;"><span style="color: #1155cc; font-size: 12pt; text-decoration-line: underline; vertical-align: baseline; white-space: pre-wrap;">https://en.wikipedia.org/wiki/Classical_demography</span></a><span style="font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">)</span></div>
</li>
</ul>
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<span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">There were a number of smaller “empires”, mainly the predecessors and/or successors of empires on this list. But on the other end, only the Mongols managed to scrape together an empire of over 100k people, and that empire split within a generation (spinning off the 60M-person Yuan dynasty).</span></div>
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<span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">Yes, this is a far cry from systematic. Yes, there’s room to complain about selection. Nonetheless, there is at least a very noticeable tendency for pre-modern empires to max out in the 50-70M population range.</span></div>
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<span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">Is the empire population cap due to computational limits in governance? I’m not sure how to properly test that hypothesis, but it does seem awfully suspicious that the founding event of the modern computing industry was triggered specifically by the US passing that 60M population mark.</span></div>
<br /><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">One interesting question to pursue next: how did other modern nations/empires handle passing the 60M population mark? India and China both achieved sustained growth and built stable nations of over 100M people during the early modern era. Presumably the British empire’s population was also beyond 100M during much of the 19th century. Did these states also face computational blockades? What techniques did they introduce which might explain their ability to overcome the 60M person cap?</span></div>
<div>
<span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;"><br /></span></div>
</span>John Wentworthhttp://www.blogger.com/profile/00325384976320984888noreply@blogger.com0tag:blogger.com,1999:blog-3971033849266349559.post-68975251854440207502017-11-13T12:12:00.002-08:002017-11-13T12:12:52.978-08:00The Open-Source Alternative to a College Degree<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Five years ago, Massive Open Online Courses (MOOCs) were the hot new thing in higher education. Finally, the time was upon us! The internet was set to upend our outdated modes of education!</span></div>
<b id="docs-internal-guid-d9cd1edb-b702-a406-bc1f-da6265cf5565" style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Today, that does not seem significantly closer to materializing.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">MOOCs failed to usher in an era of cheap, large-scale higher education for exactly the same reason that opencourseware failed to usher in an era of cheap, large-scale higher education ten years earlier: they solve the wrong problem. “Education” is not about learning things, it’s about signalling. People don’t study in school because they’ll need all that knowledge on the job. People study in school to show how smart and hardworking they are, so companies will hire them.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Similarly, the value of college isn’t in making students memorize factoids or formulas. The value of college is in filtering students. Employers hire graduates because colleges filter out weaker candidates, both in admissions and over the course of a four-year degree. College grads are much more likely to make strong employees.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">But in shifting from a learning-view of education to a signalling-view, one thing stays the same: college seems like an awful lot of resources to burn. Surely the benefit could be captured without spending four years and two hundred thousand dollars? If anything, it seems like signalling intelligence and work ethic ought to be even less resource-intensive than learning things!</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">So, what might a viable alternative to college look like? If not MOOCs, then what?</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Within software, one answer might be open-source contributions.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Already today, companies are eager to hire large contributors to major open-source projects. And such qualifications seem much more relevant to software engineering than a degree: working on large open-source projects is nearly identical to working on a large project at a software company. A candidate who has contributed lots of code to a popular library or framework will almost certainly be successful writing similar code for a company.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">On the flip side, open-source projects are constantly in need of more hands. Even the most popular libraries have long wishlists. There’s no Common Application to get started, just pick a software package, browse the open tickets and go. The filtering comes from project owners, who will review any proposed changes or additions to the code. If your code doesn’t pass muster, re-do until it does - the project owner will likely explain exactly where it falls short. If the owners of a project are unpleasant to deal with, go contribute to a different project - though projects are unlikely to grow large in the first place with unpleasant management.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">On the other hand, compare to college. There’s a lengthy admission process of questionable granularity, followed by four years of professors who may or may not be interested in helping you. If you fail, it’s a permanent black mark, even if it’s in some stupid class unrelated to your career. At the end of the day, your incentives, employers’ incentives and colleges’ incentives are not very well aligned.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">So why do people still go to college, rather than taking some online programming classes and then working on open-source projects?</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">One answer, presumably, is that college is the default path. The open-source alternative is non-obvious, especially to people not yet in the software industry. It also lacks the flexibility of a college degree. These both seem like reasonable explanations, but neither is a serious roadblock to wider “adoption” of the open-source alternative. Of course, moronic HR departments are another issue, but that only matters at large companies.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Perhaps the most serious roadblock is simply that nobody is promoting the open-source alternative, so nobody knows it’s there. In this case, there is an obvious group who is incentivized to promote it: owners and managers of open-source projects. If Apache were to promote open-source work as an alternative to a degree, they might find a lot more helping hands.</span></div>
<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Am I missing anything here? Is there some other reason why the open-source path would not work? Let me know.</span></div>
John Wentworthhttp://www.blogger.com/profile/00325384976320984888noreply@blogger.com2tag:blogger.com,1999:blog-3971033849266349559.post-43013575707849862017-11-07T11:53:00.000-08:002017-11-07T11:53:17.614-08:00Post-Scarcity<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-size: 12pt; font-style: italic; vertical-align: baseline;">Background: This is part of a short series on high-level principles relevant to political/social issues. The <a href="https://seekingquestions.blogspot.com/2017/10/from-personal-to-prison-gangs-enforcing.html">previous post</a></span><span style="font-size: 12pt; font-style: italic; vertical-align: baseline;"> discussed depersonalization and scalability of interactions. This post can be read standalone.</span>
If you want to understand the modern economy, as opposed to the economies of yore, the one source I recommend most strongly is a short story from the July 1958 issue of </span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: italic; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Astounding Science Fiction</span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">, titled “</span><a href="http://www.vb-tech.co.za/ebooks/Williams%20Ralph%20-%20Business%20as%20Usual%20During%20Alterations%20-%20SF.txt" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Business As Usual During Alterations</span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">”. It’s roughly a 15 minute read. I’m about to throw out major spoilers, so stop reading here if you want to enjoy the story first.</span></div>
<b id="docs-internal-guid-c1ac0d02-9806-083b-9a64-2a7a93172df5" style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">One morning, two devices mysteriously appear in front of city hall, along with directions on how to use them. Each has two pans and a button. Any object can be placed in one pan and, with a press of the button, a perfect duplicate will appear in the other pan. By placing one duplicator device in the pan of the other, the device itself may be duplicated as well.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Within a span of hours, material scarcity is removed as an economic constraint. What happens in such a world?</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">People tend to imagine the dawn of a new era, in which human beings can finally escape the economic rat-race of capitalism and consumerism. In the world of the duplicator, a pantry can provide all the food one needs to live. A single tank of gas can drive anywhere one wishes to go. Any good can be copied and shared with friends, for free. All material needs can be satisfied with the push of a button. Utopia, in a nutshell.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The main takeaway of the story is that this isn’t really what happens.</span></div>
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<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Towards the end, a grocer explains the new status quo eloquently:</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-left: 36pt; margin-right: 36pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">“... not very many people will buy beans and chuck roast, when they can eat wild rice and smoked pheasant breast. So, you know what I've been thinking? I think what we'll have to have, instead of a supermarket, is a sort of super-delicatessen. Just one item each of every fancy food from all over the world, thousands and thousands, all different”</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-right: 36pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Sound familiar?</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-right: 36pt; margin-top: 0pt; text-align: center;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><img height="271" src="https://lh4.googleusercontent.com/l3-CYG6Xu9skfQaZqJ0Nv1efRDiI7Ui86nCfPkYDzSD_RYQeJ_5TACPFFATznyZMpyHRgd3GsklafqiJ1v2My-MFDfTh37_3LJ4AJWV6txk2A2dZr7PCs0PPcS0gVvR3kxufgG1q" style="border: none; transform: rotate(0rad);" width="400" /></span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-right: 36pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Of course, that’s just the tip of the iceberg. When it comes to digital goods, like music or videos, the world of the duplicator is </span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: italic; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">exactly</span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> the world in which we now live. That’s the obvious parallel, but let’s not stop there.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-right: 36pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Over time, the value of raw materials and manufacturing have steadily fallen as a fraction of economic output. Even when looking at material goods, efficiency has shifted the bulk of costs from materials and manufacturing to design and engineering. We are converging to the world of the duplicator, where marginal production costs hit zero, and in many areas we’re already most of the way there!</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">This hasn’t made economic activity disappear. Pulling from the story again:</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-left: 36pt; margin-right: 36pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">“This morning, we had an economy of scarcity. Tonight, we have an economy of abundance. And yet, it doesn't seem to make much difference, it is still the same old rat race.”</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-right: 36pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">I won’t spoil all of the remarkably prescient predictions of the story - do read it yourself. </span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-right: 36pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Badge Value</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-right: 36pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Here’s one good you can’t just throw on a duplicator: a college degree.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">A college degree is more than just words on paper. It’s a badge, a mark of achievement. You can duplicate the badge, but that won’t duplicate the achievement.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-right: 36pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Rory Sutherland is another great source for understanding the modern economy. The main message of his </span><a href="https://www.ted.com/talks/rory_sutherland_life_lessons_from_an_ad_man" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">classic TED talk</span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> is that much of the value in today’s economy is not “material” value, i.e. the actual cost of making a good, but “intangible” or “badge” value. A college degree is an extreme example, but the principle applies to varying degrees in many places.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-right: 36pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The sticker price on an iphone or a pair of converse isn’t driven by their material cost. A pair of canvas high-top sneakers without a converse logo is worth less than a pair of converse, because converse are a social symbol, a signal of one’s personal identity. Clothes, cars, computers and phones, furniture, music, even food - the things we buy all come with social signals as a large component of their value. That’s intangible value.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-right: 36pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">In the world of the duplicator, the world to which our economy is converging, badge value is the lion’s share of the value of most goods. That’s because, no matter how much production costs fall, no matter how low material costs drop, intangible value remains.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-right: 36pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">In the past, we’ve sold material value because that was a scarce commodity. Now, the shoe is on the other foot, we’ll sell intangible value. </span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-right: 36pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Jobs & Employment</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-right: 36pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">One particularly prescient line from the duplicator story:</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-left: 36pt; margin-right: 36pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">“You know, when we first got the word about this thing, this duplicator, we immediately started thinking in terms of pretty drastic retrenchment. Then... it turned out we didn't have much fat to spare. Engineers, draftsmen, designers; we need about six times as many as we have. Nut-twirlers and button-pushers on assembly lines will go; but mechanics, craftsmen who can take a blueprint and turn out a piece to specified tolerance...”</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-right: 36pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Sound familiar?</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-right: 36pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">We’re already well into the post-scarcity economy, and sure enough, nut-twirlers and button-pushers are disappearing rapidly. Yet every other week, news outlets are running stories about the </span><a href="http://www.newamericaneconomy.org/sizing-up-the-gap-in-our-supply-of-stem-workers/" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">shortage</span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> of STEM workers. The economy of the future, we’re told, needs thinking and creativity rather than repetition and basic labor.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-right: 36pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The root cause of all this is the economic equivalent of the duplicator: steady growth of economic productivity, and the consequent reduction of materials and manufacturing as a share of cost. </span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-right: 36pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The duplicator story gets one big thing wrong, however: it predicts that the shift in labor demands will be met by retraining. It’s an elusive dream still chased today, most recently by </span><a href="https://hbr.org/2015/09/whos-benefiting-from-moocs-and-why" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">MOOC advocates</span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">. But at the end of the day, learning is not the main purpose of most education - after all, most of what people learn is never used on the job. Education is about signalling, through degrees and grades - badge value. That badge isn’t saying “I know Newton’s laws”, it’s saying “I have handled intellectually challenging problems”. Until we learn to </span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: italic; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">create</span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> whatever cognitive capabilities a college degree </span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: italic; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">filters</span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> for, retraining is unlikely to turn nut-twirlers into engineers. </span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-right: 36pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">And that’s the optimistic case. What if colleges don’t filter for a fixed skill level at all, but instead filter for a </span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: italic; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">relative</span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> skill level? Oversimplifying a bit, what if colleges just give degrees to the smartest 20% of people they can find?</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-right: 36pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Keeping Up with the Joneses</span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The general problem with badge value, and signalling in general, is that a badge isn’t worth anything if everybody has it. In order for a badge to be worth something, there have to be people without the badge. It’s a zero sum game.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-right: 36pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Keeping up with the Joneses is a classic example: people buy things to signal their high status, but then all their neighbors buy the same thing. They’re all back to where they started in terms of status, but everyone has less money.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-right: 36pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The prevalence of zero-sum signalling today economically stems from the reduction of material scarcity. If you think about it, zero-sum games are inherent to a so-called post-scarcity society. A positive sum game implies that net production of something is possible. That, in turn, implies that something was scarce to begin with. Without scarcity, what is there to produce?</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-right: 36pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">To put it differently: there’s always going to be something scarce. Take away material scarcity, and you’re left with scarcity of status. If there’s no way to produce net status, you’re left with a zero-sum game. More generally, remove scarcity of whatever can be produced, and you’re left with scarcity of things which do not allow net production at all - zero sum goods.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-right: 36pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Today’s world has found a way to get around this problem somewhat: heterogenous cultures. The baristas at </span><a href="https://sightglasscoffee.com/" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">SightGlass coffee</span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> have very high status among hipsters, but hardly any status with bankers. </span><a href="https://www.federalreserve.gov/aboutthefed/bios/board/yellen.htm" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Janet Yellen</span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> has very high status among bankers, but hardly any status with hipsters. Each different culture has its own internal status standards, allowing people to have high status within some culture even if they have low status in others.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-right: 36pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Cultural heterogeneity allows net status to be produced, by increasing the kinds of status which one can have. When “hipsters” became a thing, they brought along their own kind of status </span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: italic; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">in addition to</span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> all the old kinds of status. Cultural granularization makes status signalling positive-sum. But from another perspective, it just kicks the zero-sum game up to the group level: hipsters as a group compete for status with bankers, in a zero-sum manner. Thus tribal conflict between groups.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-right: 36pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Rent Seeking</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-right: 36pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">With all this talk of zero-sum games, the last piece of the post-scarcity puzzle should come as no surprise: political rent-seeking.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-right: 36pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Once we accept that economics does not disappear in the absence of material scarcity, that there will always be something scarce, we immediately need to worry about people creating artificial scarcity to claim more wealth. This is the domain of political rent-seeking, of trying to limit market entry via political channels.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-right: 36pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">One simple way to measure such activity is via lobbying expenditures, especially by businesses. Such spending actually seems to have flattened out in the last decade, but it’s still multiple orders of magnitude higher than it was thirty or forty years ago.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-right: 36pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Conclusion</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-right: 36pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Remove material scarcity as an economic constraint, and what do you get? The same old rat race. Material value no longer scarce? Sell intangible value. Sell status signals. There will always be </span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: italic; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">something</span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> scarce.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Between steady growth in industrial productivity and the advent of the digital era, today’s world looks much more like the world of the duplicator than like the world of 1958. Yet many people are still stuck in 1950’s-era economic thinking. At the end of the day, economics studies scarcity. Even in the world of the duplicator, where any material good is arbitrarily abundant, scarcity still exists.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-right: 36pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">This is the world in which we live: as material and manufacturing costs fall, badge value constitutes a greater and greater fraction of overall value. On the employment side, falling marginal production costs mean less need for assembly line workers, and more need for engineers, designers, and high-skill trades. And politically, less material scarcity means more investment in creating artificial scarcity, through political barriers to market entry.</span></div>
<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-right: 36pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Welcome to the post-scarcity economy.</span></div>
John Wentworthhttp://www.blogger.com/profile/00325384976320984888noreply@blogger.com0tag:blogger.com,1999:blog-3971033849266349559.post-24332139189199547462017-10-25T14:09:00.001-07:002017-10-25T14:09:49.728-07:00What's the Point of Capital Markets?<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: italic; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Note: This piece will use “capital” in the popular sense, i.e. as a synonym for “money”.</span></div>
<b id="docs-internal-guid-bf670b80-555c-57c5-3208-a7c5e0de999a" style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Plenty of people argue that some or all of the modern finance industry is engaged in zero-sum games. In particular, speculators, high-frequency traders, and broker-dealers are frequently vilified in this manner.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">I don’t particularly care about </span><a href="https://seekingquestions.blogspot.com/2017/06/be-more-evil.html" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">moralizing</span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">, but as someone who’s interested in making money from the capital markets, I’d much rather play a positive-sum game than fight over a fixed-size pie. If there’s real economic value to be generated, then I don’t necessarily have to outsmart everyone else in order to turn a profit. Thus the question: does the high finance industry generate real economic value, and if so, how?</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The following sections explore ways to create real economic value through finance. Each section starts with a way to create value in a more intuitive market (grain), and then moves to capital markets by analogy.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">I will omit the standard explanations of both banking and insurance, since they are explained </span><a href="https://www.frbatlanta.org/education/classroom-economist/fractional-reserve-banking/economists-perspective-transcript" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">just</span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> </span><a href="http://finance.zacks.com/risk-pooling-insurance-1890.html" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">fine</span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> elsewhere. That said, bear in mind that the functions of both banking and insurance are not exclusive to institutions with “bank” and “insurer” on their business cards - both borrowing/lending and risk pooling occur in capital markets more generally, and real economic value is created accordingly.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Gains from Trade</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Let’s start with the simplest possible econ-101 example.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">A farmer grows some grain, and wants money. A consumer is hungry, has five dollars, and for some reason has a hankering for unprocessed wheat. A bushel of wheat is worth more than five dollars to the consumer, and five dollars is worth more than a bushel of wheat to the farmer. They trade, and each is happier - real economic value has been created.</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt; text-align: center;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><img height="225" src="https://lh6.googleusercontent.com/g8WH46VMagAr_lEv3diO8sUBrmKi0Gmdrm-jusFNBzf9AYaXIs66tArAl7hrUpb8fzYGUJJVKtMyr09w9AJ49PCbr2c_p2Ge9VPT7DLtSIRBK3qeluFvtAHYEfnl7iPxzEgbGj6N" style="-webkit-transform: rotate(0.00rad); border: none; transform: rotate(0.00rad);" width="300" /></span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">What’s the analogous scenario in a capital market?</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">A company wants some capital, e.g. to buy a new oven. Somebody saving for retirement has some money, and wants to invest it. The company issues some stock to their newfound investor, in exchange for the money.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Now it starts to get interesting. With the farmer’s wheat, it was pretty clear how both sides benefitted from the trade: the farmer had lots of wheat, the consumer was hungry. But what about the stock example? In order for the company to benefit, their capital investment (e.g. the oven) must boost their earnings enough to justify the new stock issued. So for instance, if the company had to issue 1% more stock in order to raise capital for the oven, then the oven must boost their earnings by at least 1% to be a worthwhile investment.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">On the other side, in order for the company’s stock to be a good investment for our hypothetical retirement-saver, the company’s earnings (using their new oven) must yield some return.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The main takeaway is that capital markets generate gains from trade by taking some capital that isn’t being used - e.g. retirement savings - and using that capital for something useful - e.g. a new oven. This is the basis of all value creation in finance, including all of the examples to follow. If you’re ever unsure whether some part of the finance industry is creating real value, remember: at the end of the day, it’s all about using spare cash to finance investments in real business assets. Follow the capital flow, and see what it’s ultimately invested in.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">So there’s definitely gains from trade in capital markets. But this scenario completely omitted the actual finance industry - they’re mostly middlemen. How do the middlemen add value?</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">The Middlemen</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Consider the middlemen in an oversimplified grain market. They buy grain from farmers, and sell it to consumers. Their value add is straightforward: they save farmers the hard work of finding a buyer, and they save consumers the hard work of finding a seller.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The finance industry is no different.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">When a company issues stock, lining up buyers is a lot of work. Investment banks typically handle that work. Same with bonds, mortgage securities, etc. Just like middlemen in any other market, these institutions create value by saving companies the work of finding capital-sellers, and saving investors the work of finding capital-buyers.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">That said, these particular middlemen have some SERIOUSLY entrenched </span><a href="http://www.econlib.org/library/Enc/RentSeeking.html" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">rent-seeking</span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">. Imagine that all the grain middlemen managed to form an industry group, lobbied a bit, and their industry group was given the legal power to regulate their own industry - that’s FINRA. Unsurprisingly, they made it illegal for would-be investors to sell capital directly to companies without going through the FINRA-member middlemen, and also made it difficult for new middlemen to enter the space. They still offer SOME real economic value, but they’re also getting a lot by rent-seeking.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Anyway, those are just the most direct middlemen - those who sit directly between companies and investors. There are others, too.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Warehousing</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Ever since ancient times, people have stored grain. It can be quite a good business: buy grain right after the main harvest when it’s abundant and cheap, store it for a while, and sell it when grain supplies run low. This can create huge amounts of real economic value, e.g. by preventing a grain shortage (a.k.a famine).</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Most of the players we think of in the stock market are in the business of storing capital. They buy capital when it’s abundant (i.e. sell stocks when prices are high), store that capital, and sell it when the capital supply is low (i.e. buy stocks when prices are low). This can be a bit confusing, since buy/sell are kind of backwards compared to how we usually think of them. Fundamentally, that’s because capital is the product, whereas usually the other thing is the product and capital is just a means of exchange. But it’s the same concept as warehousing grain, and it creates value in the same way: by preventing a capital shortage (a.k.a. market crash and economic recession). </span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Different kinds of investors do this at different time scales. Unlike grain, there’s very little overhead when warehousing stocks, so day traders and high-frequency traders can warehouse small amounts for short times. This sort of activity prevents small market crashes - more day traders and high-frequency traders means less volatile prices on short time scales. Larger investors do the same thing at longer time scales - pension funds warehouse stocks for months or years at a time.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">This is also where the information aspect of markets first kicks in. If you’re in the business of warehousing, then anticipated future abundances or shortages of capital (and of financial assets) is key to producing real economic value - and to making a profit. Again, this is counterintuitive at first. In the futures markets, for instance, we’re used to thinking about making money by forecasting abundances or shortages of commodities. To understand capital markets more broadly, we need to think of capital as the commodity.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Forecasting</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Finally, we get to the usual picture of high finance: forecasting company performance. As before, we’ll start with the grain market, but with a twist - now there’s barter.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Rather than buying grain with money, imagine that consumers barter for grain, paying with chickens. Different consumers presumably have chickens of varying quality, so their chickens will buy varying amounts of grain.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Now, suppose some middleman comes along and realizes that a new consumer - let’s call her <a href="http://tvtropes.org/pmwiki/pmwiki.php/Main/AliceAndBob">Alice</a> - raises chickens of higher quality than most people realize. Everyone will figure this out eventually, as people eat Alice’ chickens and word gets around, but for now the secret is still fresh. Accordingly, this middleman offers extra grain for Alice’ chickens. Does this create real economic value?</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">It all depends on the elasticity of Alice’ chicken supply.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">If Alice only raises fifty chickens, no matter what, then fifty of Alice’ chickens will eventually be consumed, no matter what. There’s the usual gains from trade, but the middleman isn’t increasing those. The middleman’s gain comes entirely from other traders’ ignorance of the quality of Alice’ chickens; the middleman’s gain is exactly equal to the other traders’ missed opportunity.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">But the story is different if Alice responds to the higher price by supplying more chickens. Then, real economic value clearly </span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: italic; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">is</span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> created. By making prices better reflect the true value of Alice’ chickens, the middleman has enabled more chickens to be created.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Now let’s switch to capital markets.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">When people imagine making money in stocks, the usual picture is:</span></div>
<ul style="margin-bottom: 0pt; margin-top: 0pt;">
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Find a company whose stock is “under-valued”</span></div>
</li>
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Buy their stock</span></div>
</li>
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">...</span></div>
</li>
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Profit!</span></div>
</li>
</ul>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Does this create real economic value?</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">It all depends on the elasticity of the company’s outstanding shares.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">If you buy the stock from an investor, then you’re simply gaining money which that investor would otherwise have gained. It’s zero sum: their missed opportunity is exactly equal to your gain. But if you buy the stock </span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: italic; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">from the company</span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> (either directly or indirectly), then it’s a whole different story. You’re supplying a bit of extra capital to the company. That will create real economic value when the company can invest the capital better than the competition - i.e. this company can get more value out of an extra oven than some other company would get out of an equivalent investment.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Put differently, suppose a middleman buys some stock in Millisoft. How much additional capital does Millisoft receive, compared to a scenario where the middleman did not buy any stock? Then, how much additional value does that capital create, when it’s used by Millisoft rather than whoever might have used it otherwise? That’s where the real economic value comes from, when forecasting company earnings.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">When you think about it like that… well, forecasting earnings (and other similar activity) probably creates some real economic value, but probably not much, especially at the margin. Most of the gains from this sort of activity really are zero-sum.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Conclusion</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">I don’t have numbers on this, but I would guess that most of the real economic value created by the high finance industry comes from warehousing. Ironically, it’s largely from the day traders and high-frequency algo traders who are so often vilified.</span></div>
<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Institutions like investment banks also create real economic value, but they are rent-heavy. Looking for places where investors’ expectations are inaccurate can create value in principle, but it’s probably mostly zero-sum.</span></div>
John Wentworthhttp://www.blogger.com/profile/00325384976320984888noreply@blogger.com0tag:blogger.com,1999:blog-3971033849266349559.post-20204347339132589952017-10-10T12:39:00.002-07:002017-10-10T12:39:20.997-07:00From Personal to Prison Gangs: Enforcing Prosocial Behavior<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: italic; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Background: This is part of a short series on high-level principles relevant to political/social issues. The </span><a href="https://seekingquestions.blogspot.com/2017/09/knowledge-power-and-politics.html" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 12pt; font-style: italic; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">first post</span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: italic; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> set up some ground rules for the general approach.</span></div>
<b id="docs-internal-guid-527129d0-07c9-7f1a-3a81-6d76e3afbfc5" style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">David Friedman has a </span><a href="http://www.daviddfriedman.com/Legal%20Systems/LegalSystemsContents.htm" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">fascinating upcoming book</span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> on alternative legal systems. One chapter focusses on prison law - not the nominal rules, but the rules enforced by prisoners themselves.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The unofficial legal system of California prisoners is particularly interesting because it underwent a phase change in the 1960’s.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Prior to the 1960’s, prisoners ran on a decentralized code of conduct - various unwritten rules roughly amounting to “mind your own business and don’t cheat anyone”. Prisoners who kept to the code were afforded some respect by their fellow inmates. Prisoners who violated the code were ostracized, making them fair game for the more predatory inmates. There was no formal enforcement; the code was essentially a reputation system.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">In the 1960’s, that changed. During the code era, California’s total prison population was only about 5000, with about 1000 inmates in a typical prison. That’s quite a bit more than </span><a href="https://en.wikipedia.org/wiki/Dunbar%27s_number" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Dunbar’s number</span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">, but still low enough for a reputation system to work through second-order connections. By 1970, California’s prison population had ballooned past 25000; today it is over 170000. The number of prisons also grew, but not nearly as quickly as the population, and today’s prisoners frequently move across prisons anyway. In short, a decentralized reputation system became untenable. There were too many other inmates to keep track of.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">As the reputation system collapsed, a new legal institution grew to fill the void: prison gangs. Under the gang system, each inmate is expected to affiliate with a gang (though most are not formal gang members). The gang will explain the rules, often in written form, and enforce them on their own affiliates. When conflict arises between affiliates of different gangs, the gang leaders negotiate settlement, with gang leaders enforcing punishments on their own affiliates. (Gang leaders are strongly motivated to avoid gang-level conflicts.) Rather than needing to track reputation of everyone individually, inmates need only pay attention to gangs at a group level.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Of course, inmates need some way to tell who is affiliated with each gang - thus the rise of racial segregation in prison. During the code era, prisoners tended to associate by race and culture, but there was no overt racial hostility and no hard rules against associating across race. But today’s prison gangs are highly racially segregated, making it easy to recognize the gang affiliation of individual inmates. They claim territory in prisons - showers or ball courts - and enforce their claims, resulting in hard racial segregation.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The change from a small, low-connection prison population to a large, high-connection population was the root cause. That change drove a transition from a decentralized, reputation-based system to prison gangs. This, in turn, involved two further transitions. First, a transition from decentralized, informal unwritten rules to formal written rules with centralized enforcement. Second, a transition from individual to group-level identity, in this case manifesting as racial segregation.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Generalization</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">This is hardly unique to prisons. The pattern is universal among human institutions. In small groups, everybody knows everybody. Rules are informal, identity is individual. But as groups grow:</span></div>
<ul style="margin-bottom: 0pt; margin-top: 0pt;">
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Rules become formal, written, and centrally enforced</span></div>
</li>
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Identity becomes group-based.</span></div>
</li>
</ul>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Consider companies. I work at a ten-person company. Everyone in the office knows everyone else by name, and everyone has some idea of what everyone else is working on. We have nominal job titles, but everybody works on whatever needs doing. Our performance review process is to occasionally raise the topic in weekly one-on-one meetings.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Go to a thousand or ten thousand person company, and job titles play a much stronger role in who does what. People don’t know everyone, so they identify others by department or role. They understand what a developer or a manager does, rather than understanding what John or Allan does. Identity becomes group-based. At the same time, hierarchy and bureaucracy are formalized.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The key parameter here is </span><a href="http://ncase.me/trust/" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">number of interactions between each pair of people</span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">. In small groups, each pair of people has many interactions, so people get to know each other. In large groups, there are many one-off interactions between strangers. Without past interactions to fall back on, people need other ways to figure out how to interact with each other. One solution is formal rules, which give guidance on interactions with anyone. Another solution is group-based identity - if I know how to interact with lawyers at work in general, then I don’t need to know each individual lawyer.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">In this regard, prisons and companies are just microcosms of society in general.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Society</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">At some point over the past couple hundred years, society underwent a transition similar to that of the California prison system.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">In 1800, people were mostly farmers, living in small towns. The local population was within an order of magnitude of Dunbar’s number, and generally small enough to rely on reputation for day-to-day dealings.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Today, that is not the case [citation needed].</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Just as in prisons and companies, we should expect this change to drive two kinds of transitions:</span></div>
<ul style="margin-bottom: 0pt; margin-top: 0pt;">
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">A transition from informal, decentralized rules to formal, written, centrally-enforced rules.</span></div>
</li>
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">A transition from individual to group-level identity.</span></div>
</li>
</ul>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">This can explain an awful lot of the ways in which society has changed over the past couple hundred years, as well as how specific social institutions evolve over time.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">To take just a few examples…</span></div>
<ul style="margin-bottom: 0pt; margin-top: 0pt;">
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Regulation. As people have more one-off interactions, reputation becomes less tenable, and we should expect formal regulation to grow. Conversely, regulations are routinely ignored among people who know each other.</span></div>
</li>
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Litigation. Again, with more one-off interactions, we should expect people to rely more on formal litigation and less on informal settlement. Conversely, people who interact frequently rarely sue each other - and when they do, it’s expected to mess up the relationship.</span></div>
</li>
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Professional licensing. Without reputation, people need some way to signal that they are safe to hire. We should expect licensing to increase as pairwise interactions decrease.</span></div>
</li>
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Credentialism. This is just a generalization of licensing. As reputation fails, we should expect people to rely more heavily on formal credentials - “you are your degree” and so forth.</span></div>
</li>
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Stereotyping. Without past interactions with a particular person, we should expect people to generalize based on superficially “similar” people. This could be anything from the usual culprits (race, ethnicity, age) to job roles (actuaries, lawyers) to consumption signals (iphone, converse, fancy suit).</span></div>
</li>
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<a href="http://lesswrong.com/lw/gt/a_fable_of_science_and_politics/" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Tribalism</span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">. From nationalism to sports fans to identity politics, an increasing prevalence of group-level identity means an increasing prevalence of tribal behavior. Based on this, I predict that social media outlets with more one-off or low-count interactions are characterized by more extreme tribalism.</span></div>
</li>
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Standards for impersonal interactions. “Professionalism” at work is a good example.</span></div>
</li>
</ul>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">I’ve focussed mostly on negative examples here, but it’s not all bad - even some of these examples have upsides. When California’s prisons moved from an informal code to prison gangs, the homicide rate dropped like a rock; the gangs hate prison lockdowns, so they go to great lengths to prevent homicides. Of course, gangs have lots of downsides too. The point which generalizes is this: bodies with centralized power have their own incentives, and outcomes will be “good” to exactly the extent that the incentives of the centralized power align with everybody else’ incentives and desires.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Consider credentialism, for example. It’s not all bad - to the extent that we now hire based on degree rather than nepotism, it’s probably a step up. But on the other hand, colleges themselves have </span><a href="https://seekingquestions.blogspot.com/2017/05/economics-of-college-cost.html" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">less than ideal incentives</span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">. Even setting aside colleges’ incentives, the whole credential system shoehorns people into one-size-fits-all solutions; a </span><a href="https://en.wikipedia.org/wiki/Albert_Einstein" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">brilliant patent clerk</span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> would have a much more difficult time making a name in physics today than a hundred years ago.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Takeaway</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Of course, all of these examples share one critical positive feature: they scale. That’s the whole reason things changed in the first place - we needed systems which could scale up beyond personal relationships and reputation.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">This brings us to the takeaway: what should you do if you want to change these things? Perhaps you want a society with less credentialism, regulation, stereotyping, tribalism, etc. Maybe you like some of these things but not others. Regardless, surely there’s something somewhere on that list you’re less than happy about.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The first takeaway is that these are not primarily political issues. The changes were driven by technology and economics, which created a broader social graph with fewer repeated interactions. Political action is unlikely to reverse any of these changes; the equilibrium has shifted, and any policy change would be fighting gravity. Even if employers were outlawed from making hiring decisions based on college degree, they’d find some work-around which amounted to the same thing. Even if the entire federal register disappeared overnight, de-facto industry regulatory bodies would pop up. And so forth.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">So if we want to e.g. reduce regulation, we should first focus on the underlying socioeconomic problem: fewer interactions. A world of Amazon and Walmart, where every consumer faces decisions between a million different products, is inevitably a world where consumers do not know producers very well. There’s just too many products and companies to keep track of the reputation of each. To reduce regulation, first focus on solving that problem, scalably. Think amazon reviews - it’s an imperfect system, but it’s far more flexible and efficient than formal regulation, and it scales.</span></div>
<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Now for the real problem: online reviews are literally the only example I could come up with where technology offers a way to scale-up reputation-based systems, and maybe someday roll back centralized control structures or group identities. How can we solve these sorts of problems more generally? Please let me know if you have ideas.</span></div>
John Wentworthhttp://www.blogger.com/profile/00325384976320984888noreply@blogger.com2tag:blogger.com,1999:blog-3971033849266349559.post-62418426244277458652017-10-04T12:56:00.000-07:002017-10-04T12:56:41.561-07:00IQ Scores: What are they good for?<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<i><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Response to </span><a href="http://slatestarcodex.com/2017/09/27/against-individual-iq-worries/" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 12pt; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">http://slatestarcodex.com/2017/09/27/against-individual-iq-worries/</span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> and </span><a href="https://www.scottaaronson.com/blog/" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 12pt; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">https://www.scottaaronson.com/blog/</span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">. This post can be read standalone.</span></i></div>
<b id="docs-internal-guid-53c55ce5-e8f4-11ea-7a3a-3e788004a716" style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">I recently encountered two articles arguing against making too much of one’s own IQ score. Both of them mostly boil down to “IQ tests are a REALLY noisy measure of </span><a href="https://en.wikipedia.org/wiki/G_factor_(psychometrics)" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 12pt; font-style: italic; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">g</span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">, and on an individual level the noise is going to mask a lot of the signal”. This is totally 100% correct, and is probably responsible for most of the hand-wringing those two authors encounter.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">But let’s cut past the noise: suppose you’ve taken an IQ test, and the SATs, and maybe throw in some other measures too. That’s all Bayesian evidence for your underlying </span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: italic; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">g</span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">, so you can put them all together to get a hopefully-less-noisy estimate. The result tells you something about your intelligence relative to the rest of the population. What should you do with this information? In particular, if the number is lower than you’d like, what’s the right response?</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">There are multiple good answers to that question, most notably relative advantage - pick up an intro microeconomics text if you want to know more about that one. But in keeping with my usual policy of “don’t write things that somebody else already wrote”, I’ll focus on an answer which I haven’t seen used in this context before: strategic variance.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">The Underdog Strategy</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Suppose you’re in an oversimplified one-on-one basketball game with three rounds. Strictly speaking, your opponent is a better player than you: they average 24 points per round, while you average 22. But you have a trick up your sleeve: your opponent is a one-trick pony, while you have multiple play styles. One play style is conservative and consistent: in one round, you’ll score 22 points and your opponent will score 24, consistently. Your other play style is more aggressive, with more variance: in one round, your opponent will score 24, and you’ll score either 14 or 30, with a 50% chance for each.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">For both play styles, your opponent averages 2 more points per round than you do. But you can still win more often than not. Here’s the strategy:</span></div>
<ul style="margin-bottom: 0pt; margin-top: 0pt;">
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Round 1: play aggressive. You end up ahead by 6 points (50% chance) or behind by 10 (50%).</span></div>
</li>
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Round 2 & 3: If you’re ahead, play conservative; if you’re behind, play aggressive. If you wound up ahead in round 1, then you’ll play conservative for the next two rounds and win by 2. If you wound up behind in round 1, then you’ll play aggressive for 2 rounds and have a 25% chance of a comeback.</span></div>
</li>
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Put that all together, and your chance of winning is 62.5%.</span></div>
</li>
</ul>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Despite your opponent scoring more points on average regardless of strategy, you can still win more often than not!</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The example is somewhat artificial, but the idea generalizes:</span></div>
<ul style="margin-bottom: 0pt; margin-top: 0pt;">
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">When you’re “ahead”, play conservative - avoid risk, minimize variance.</span></div>
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<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">When you’re “behind”, play aggressive - take risk, maximize variance.</span></div>
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</ul>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The principle generalizes easily to practically any game with some way of keeping score - virtually all sports, board games, card games, and so forth. (On a side note, it also applies to </span><a href="https://www.youtube.com/watch?v=F6QMU3KD7zw" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">bacterial chemotaxis</span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">.) Let’s apply it to real life.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">The Underdog Strategy in Real Life</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Suppose my goal in life is to solve some major open problem in math/science - we’ll use the P-NP problem as an example. Then my own intelligence - </span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: italic; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">g</span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">, IQ, whatever measure we’re using - is a very useful indicator of how far “ahead” or “behind” I’m starting.</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Consider </span><a href="https://terrytao.wordpress.com/" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Terence Tao</span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> - presumably he’d be starting way “ahead” by this criteria. If he spent a year or two focussed entirely on P-NP, he’d probably be one of the top 5 smartest people ever to invest that much effort in the problem. There’s a reasonable chance that he could solve it by brute force of intellect - by being smarter than anyone else who’d tried. Maybe P-NP is straightforward for anyone who’s up-to-date with known </span><a href="https://www.scottaaronson.com/papers/pnp.pdf" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">circuit complexity lower bounds</span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> and has sufficiently high g, and the problem is just waiting for someone smart enough to come along and put the pieces together. There’s a realistic chance that Terence Tao could be the first person to come along who’s smart enough.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">When you look at it like that, if Terence Tao decides to seriously tackle P-NP, then just spending a year pushing current approaches would be a very reasonable starting point for him. He’s starting out “ahead”, so a conservative low-risk strategy makes sense as a first thing to try.</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">But what if </span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: italic; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">I</span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> want to solve P-NP?</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">I’m smart, but I wouldn’t be in the top 100 or probably even the top 1000 smartest people who’ve tackled P-NP. I will never be able to solve P-NP by brute force of intellect, by taking the standard approaches and throwing my own intelligence at them. I am not that smart.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">I’d be starting “behind” in this game, my chance of winning is low a priori, so to maximize my chances I need to add variance. In this context, that means trying weird approaches. Investing effort in tools which may or may not be useful but are definitely different from what everyone else is doing, and applying those tools to the problem. On average, any particular random thing is less likely to be the key to P-NP than lower-bounding circuit complexity. But I, personally, am more likely to solve P-NP by applying some weird technique from probability or physics or economics or even biology, than by pushing already-popular strategies. (That doesn’t mean I shouldn’t get up to date with current research, just that I shouldn’t invest much effort pushing past the cutting edge in that particular direction.)</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Conclusion</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">One last comment to wrap it up: strategic variance only applies to binary problems, where you either clear the bar or you don’t. If your goal in the oversimplified one-on-one basketball game is to improve your average score, then variance won’t help. If your goal in life is to maximize your expected earnings, then again, variance in and of itself will not help. On the other hand, if your goal in life is to become a billionaire, then strategic variance - i.e. risk taking - will help.</span></div>
<br /><span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">Generalizing further: as humans, we tend to invest less effort than we should in high-level life strategy. Things like estimating your own </span><span style="font-family: Arial; font-size: 12pt; font-style: italic; vertical-align: baseline; white-space: pre-wrap;">g</span><span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">/IQ are useful mainly to inform that strategy. The more strategic you are, the more value you can extract from that information. Strategic variance is just one class of strategies. Relative advantage is the main underlying strategy - e.g. in the oversimplified basketball game, you win by exploiting your relative advantage of being able to adjust your own variance. Study relative advantage, and pay attention to which tradeoffs are cheaper for you than for others.</span>John Wentworthhttp://www.blogger.com/profile/00325384976320984888noreply@blogger.com0tag:blogger.com,1999:blog-3971033849266349559.post-65387261906674168182017-09-26T13:19:00.000-07:002017-09-26T13:19:31.736-07:00Knowledge, Power and Politics<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Benjamin Jesty</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Our story begins in 1774, a year before the American Revolution, in Dorset county, England, with a dairy farmer named Benjamin Jesty.</span></div>
<b id="docs-internal-guid-bf42d4cc-bfd3-06bf-c197-aef78431e867" style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">A wave of smallpox was running across England that year. Jesty himself was in no danger - he had previously contracted cowpox. The cowpox was contracted by milking infected cows, and was well known among dairy farmers to convey immunity against smallpox.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Unfortunately, neither Jesty’s wife nor his two children had any such advantage. When smallpox began to pop up in Dorset, Jesty decided to take drastic action. He took his family to a nearby farm with a cowpox-infected cow, scratched their arms, and wiped pus from the infected cow on the scratches. Over the next few days, their arms grew somewhat inflamed and they suffered the mild symptoms of cowpox - but it quickly passed. As the wave of smallpox passed through the town, none of the three were infected. Throughout the rest of their lives, through multiple waves of smallpox, they were immune.</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The same technique would be popularized twenty years later by Edward Jenner, marking the first vaccine and the beginning of modern medicine.</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Power vs Knowledge</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The same wave of smallpox which ran across England in 1774 also made its way across Europe. In May, it reached Louis XV, King of France. Despite the wealth of a major government and the talents of Europe’s most respected doctors, Louis XV died of smallpox on May 10, 1774.</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Academics in the study of politics typically define “power” as the ability to influence or control the actions of other people - a slight generalization of “authority”. I want to discuss a somewhat more general notion of power - a kind of power which Benjamin Jesty possessed, and Louis XV lacked. I want to discuss power as the ability to influence or control the world around you, in whatever manner is relevant to you.</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Louis XV had no shortage of authority. He had money, and his word was law. Louis XV could give orders, and they would be followed. But no orders he could give would conjure up the cure for smallpox. Jesty, on the other hand, had the means of a farmer and no authority to speak of. But Jesty had a power which Louis XV lacked - Jesty knew how to prevent smallpox. Jesty did not need money or authority; he had knowledge.</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">They say that knowledge is power, but the relationship is more fundamental than that. Knowledge is… the first power. The base power. The foundation upon which any other form of power must sit.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Without knowledge, any other kind of power is worthless. Without knowledge, no amount of money or authority could stop smallpox. With knowledge, it was trivial. For Jesty, immunizing his family against smallpox was a day’s errand. It was a thing-he-could-do in much the same way as walking into town to buy some salt.</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">What if we extend this same idea to politics?</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Politics Today: Total Spending</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">I propose that, in the sense that I’ve been using the word, our political figureheads possess little-to-no power.</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Let’s take a relatively simple problem: suppose you’re the Republican party, and you want to dramatically scale back government spending as a share of GDP. The GOP controls most state governments, both houses of congress, the presidency, and the supreme court. They’re the Louis XV of this story; they have the authority to do whatever they want. And paring down the scale of federal government has been a major plank in the conservative platform for decades. And yet… there doesn’t seem to be much paring underway. </span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Some people take the cynical view, that Republican figureheads don’t actually care about cutting spending. But a theory like that could explain any behavior - and besides, </span><a href="https://en.wikipedia.org/wiki/Hanlon%27s_razor" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">honest stupidity always has a higher prior than malevolence</span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">. Here’s my theory: Republicans lack the power to prevent government spending growth in much the same way that Louis XV lacked the power to prevent smallpox.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">To see why, we’ll need to briefly dive into the numbers on government spending.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Let’s start with the main graph:</span></div>
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<a href="https://fivethirtyeight.blogs.nytimes.com/2013/01/16/what-is-driving-growth-in-government-spending/" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;"><img height="375" src="https://lh3.googleusercontent.com/oyM2otOettI106kmyK6rBA_65APPYcY7pPkL26nVb3YAHXzD6xz6NWaTB0YJ-V6dGGYbuQHjsfZD0FXHJvCWe1wQ43sUTxVOskkVTNMiGoBGvHVzVxTMkgj9bMLzzTHQliMkLRMa" style="-webkit-transform: rotate(0.00rad); border: none; transform: rotate(0.00rad);" width="480" /></span></a></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">As the graph shows, pretty much all the growth in government spending over the past few decades has come from entitlements - primarily social security, medicare and medicaid. Everything else has been squeezed in an attempt to keep the budget in check as entitlement spending soars.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Within entitlements, growth is driven mainly by social security and medicare. The math is pretty straightforward: old people are expensive, the population is getting older very quickly, carry the two, spending goes up.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">There is no path to stop the growth of government spending without cutting off old people. But this is counterintuitive to a lot of people on the right - the government didn’t used to spend so much, so why the hell must it spend so much now? Oh, we’re spending on healthcare? The problem must be that healthcare has become less efficient! We need to let the market do its job!</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">At some point, I will write a blog post entirely digging into data on healthcare costs. Suffice to say, efficiency is not the limiting factor. (For those on the left: no, price gouging by insurance/pharma/other companies is not the main driver either.) The main driver is people getting older, and people consuming lots of healthcare (e.g. high nursing home usage).</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">But if the Republican party is the Louis XV of this scenario, who’s the Benjamin Jesty?</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Let’s view reduction of government spending as a knowledge problem. Imagine you want to make reduction of government spending a thing-you-could-do, in the same way that going to the store to buy some milk is a thing-you-could-do. What knowledge would make that possible?</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">It’s obvious once you see it: antiaging. If and when antiaging technology hits the market, medicare spending will evaporate. The expensive health problems of the elderly will disappear, and with them the growth of government spending.</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Generalizing the Concept: A Different Approach to Politics</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">When smallpox died, it didn’t fight back.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">If someone were to introduce cheap, credible antiaging technology to the market today, government spending would drop like insurance stocks during hurricane season. It would happen entirely automatically: demand for healthcare would fall, causing medicare claims to fall, causing spending to fall. Congress would be left arguing over what to do with their giant budget surplus.</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">This wouldn’t take some great social movement or political campaign. It wouldn’t require arguing or fighting or convincing or converting. It would just take knowledge, an idea and a little elbow grease. It could be done by a small team, or possibly even one person. Heck, it would probably even be profitable.</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Technology and economics lead inexorably to an equilibrium. Try to change the equilibrium by politics, and you’ll be fighting gravity all the way. But if you change the technology, then gravity is on your side. Political movements take millions of people, but a technological change takes just a handful of researchers and/or entrepreneurs. The rest is gravity.</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">But there’s a trade-off: effecting social change through technology requires knowledge. It requires an in-depth understanding of the underlying causes of the equilibrium we wish to change. Usually, that means economics and game theory, plus a bunch of domain-specific research, plus whatever skills are needed to implement the new technology.</span></div>
<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Political movements make it easy to try, but rare to succeed. A technological approach requires far more work and knowledge to even attempt, but offers a much shorter path to success.</span></div>
John Wentworthhttp://www.blogger.com/profile/00325384976320984888noreply@blogger.com0tag:blogger.com,1999:blog-3971033849266349559.post-28284162874127035412017-08-08T18:51:00.000-07:002017-08-08T18:51:16.817-07:00Reverse Debate<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">One observation about </span><a href="https://motherboard.vice.com/en_us/article/evzjww/here-are-the-citations-for-the-anti-diversity-manifesto-circulating-at-google" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Google’s diversity memo firestorm</span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">: neither side seems to be changing their minds. Ideally, at least one side would be able to learn something. Maybe have a public debate?</span></div>
<b id="docs-internal-guid-66091d94-c4ac-d234-295b-c68f10b22f3e" style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">There are two universal problems with public debate. First, they’re more a measure of debate skills than statistical strength of evidence. Second, confirmation bias means they often just increase polarization. (Third, in today’s environment, anything said by either side will likely be twisted beyond recognition by opposition reporters.) The net effect is that public debate rarely changes anyone’s mind about anything.</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">This creates an interesting challenge: design a public debate format which actually makes people likely to change their minds. Ideally, people would be more likely to converge on an answer, and sides would become less polarized rather than more.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">(I’m about to present my solution, so if you want to try this challenge yourself, pause reading now.)</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">My solution: </span></div>
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<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Side A must present the arguments of side B. </span></div>
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<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Side B judges whether their arguments have been presented accurately. </span></div>
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<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">They then switch, back and forth, for as long as the debate allows. </span></div>
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</ul>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">If you’re familiar with the </span><a href="http://econlog.econlib.org/archives/2011/06/the_ideological.html" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Ideological Turing Test</span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">, this is the same concept projected into a debate setting.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The format can vary somewhat depending on the scoring, but the simple pass/repeat rule is my favorite:</span></div>
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<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Side A presents the arguments of side B. </span></div>
</li>
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">If side B is not satisfied with the presentation, then side A must try again. </span></div>
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<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">This repeats until side A succeeds, at which point the two teams switch roles. </span></div>
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</ul>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Of course, repetition would grow dull in a public debate setting. To avoid actually needing to repeat a lot, both sides would practice together exhaustively before the public “debate” - in all likelihood they’d converge on a common view before the spectacle even began, and the public debate would consist of each team trying to convince those on their own side!</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">One important question remains: how would anyone be motivated to participate in such a debate in the first place? The sort of people attracted to an honest, collaborative effort of this nature are unlikely to be those most in need of it.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">In the context of the recent Google firestorm, motivation would have been simple: people’s jobs were on the line. The publisher of the memo had his job on the line already. On the other side, plenty of people threatened to quit if he wasn’t fired. So, invite one of those people to challenge the publisher in a metaphorical debate to the death! Once either participant finished the debate, successfully representing all of their opponent’s arguments, they’d be asked if they still thought their opponent should be fired. Both participants could potentially lose their jobs, if they both passed the debate and decided to fire each other.</span></div>
<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Of course, we wouldn’t really hope/expect that to happen. Really, we’d hope that at least one side saw the light, and then turned around to preach to their own tribe. The point, after all, is to actually change people’s minds.</span></div>
John Wentworthhttp://www.blogger.com/profile/00325384976320984888noreply@blogger.com0tag:blogger.com,1999:blog-3971033849266349559.post-25725589153694511222017-07-20T14:31:00.000-07:002017-07-20T14:31:21.479-07:00Detecting Intelligence with an Unknown Objective<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-family: Arial; font-size: 12pt; font-style: italic; white-space: pre-wrap;">This is the second post in a series on theory for adaptive systems. The <a href="https://seekingquestions.blogspot.com/2017/06/the-scientific-bottleneck.html">previous post</a> argued that the lack of good adaptive systems theory is the main bottleneck to scientific progress today. The main goal for the next few posts is to lay out questions and problems, and to suggest possible approaches toward quantitative solutions.</span></div>
<b id="docs-internal-guid-79a5cb54-61e4-ea3c-dd5a-5c9bd9ebd461" style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Today’s question: How can we recognize adaptive systems in the wild?</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">To be more concrete: suppose I run a ridiculously huge <a href="https://en.wikipedia.org/wiki/Conway%27s_Game_of_Life">Game of Life</a> simulation with random initial conditions. What function can I run on the output in order to detect adaptive system behavior within the simulation? Specifically, we’re looking for subsystems of the Game of Life which:</span></div>
<ul style="margin-bottom: 0pt; margin-top: 0pt;">
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Learn from their environment</span></div>
</li>
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Use what they learn to optimize for some objective</span></div>
</li>
</ul>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">I see two major difficulties to this problem:</span></div>
<ol style="margin-bottom: 0pt; margin-top: 0pt;">
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: decimal; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">We don’t know the system’s objective.</span></div>
</li>
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: decimal; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">We don’t know what defines the “system”.</span></div>
</li>
</ol>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">I’ll focus on the first part for now; defining the “system” will be a running theme which I will revisit toward the end of these posts.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Example 1: Street Map</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Imagine cars driving around on a street map which looks roughly like this:</span></div>
<div class="separator" style="clear: both; text-align: center;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: 400; margin-left: 1em; margin-right: 1em; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><img height="438" src="https://docs.google.com/a/g.hmc.edu/drawings/d/sHW2WjultUlQ07eqfzDBpEw/image?w=510&h=438&rev=23&ac=1" style="border: none; transform: rotate(0rad);" width="510" /></span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
</div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Suppose two types of cars drive around this map. The first type wanders about, picking a random direction at each intersection until it reaches its destination. The second type knows what the map looks like, and takes the shortest path from its starting point to its destination. Looking at their paths as they drive, how could we tell the two apart? In particular, how could we tell the two apart </span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: italic; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">without knowing the destination</span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">?</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">It would be tedious but straightforward to build an elaborate statistical test for this particular problem, but it wouldn’t generalize. Instead, I’ll point out an heuristic: the intelligent cars, the cars which take the shortest route, will almost always start by driving toward the center, and almost always finish by driving away from the center.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Why? Pick two points at random on the map. Look at the shortest path between them. A majority of the time, it will go through the center point. Even when it doesn’t, it almost always goes first toward the center, then away - it never gets closer to the center then further then closer again.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">(For the mathematically inclined: you can prove this by looking at the map as a tree, picking a root, and viewing “distance to center” as the depth within the tree.)</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Example 2: Shortest Paths</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">In the street map example, we can detect “intelligent” behavior by looking for cars which first go towards the center of the map. This behavior is statistical evidence that the car is following a relatively short path to some destination.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Can we generalize this? “Intelligent” cars only start by going toward the center because that’s the shortest path. Even on a more general map, we could look for statistical patterns among shortest paths. On a real-world road map, “shortest paths” over significant distances usually hop onto a highway for most of the drive. Even locally, there are more central and less central roads. Without diving into any statistics, it seems like we could take a typical road map and develop a statistical test to tell whether a car is following a short path between two points, without needing to know the car’s destination.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">But what makes the short path “intelligent” at all? Why do we intuitively associate short paths with intelligent behavior, as opposed to wandering randomly around the map?</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Example 3: Resource Acquisition</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Let’s look at the problem from a different angle. One characteristic behavior of living creatures, from animals to bacteria, is a tendency to acquire resources.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">In biology, the main types of resources acquired are energy and certain standard biochemicals. Each of these resources is stored - e.g. energy is stored as starch, fat, ATP, an electric potential difference, etc.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Why would adaptive systems in general want to acquire and store resources? Because it gives the system more options. A human who accumulates lots of currency has more options available than a human without any currency. A bacteria with a store of energy has more options than a bacteria without. Ultimately, those resources could be used in a variety of different ways in order to achieve the system’s objective. </span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Whether it’s a human taking a vacation or buying a car, a bacteria reproducing or growing, a pool of resources offer options suitable to many different situations. Intuitively, we expect adaptive systems to accumulate resources, because those resources will give the system many more options in the future.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Example 4: Time as a Resource</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">One universal resource is time. In this view, saving time is a special case of accumulating resources: time saved can be spent in a wide variety of ways, offering more options in the future.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">This ties back to the shortest path example. We expect “intelligent” systems to take short paths in order to save time. They save time because time is a universal resource - time saved can almost always be “spent” on something else useful to the system’s goal.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">In the street map example, we run into a more unusual resource: “centrality” in the road map. (Mathematically: height in the tree.) A more central location is closer to most points. By moving toward the center of the map, a car accumulates centrality. It can then cash in that centrality for time savings, converting one resource (centrality) into another (time).</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">A Little Formalization</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">We now have a handful of examples of intuitively “intelligent” behavior - short paths, energy and currency accumulation, saving time. These examples all amount to the same thing: accumulating some useful resource. Can we formalize this intuition somewhat? Can we generalize it further?</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">In AI theory, there’s a duality between constraint relaxation and heuristics. A constraint relaxation would be something like “what could the system do if it had more of resource X?”. The amount of X is constrained, and we “relax” that constraint to see if more X would be useful. That constraint relaxation has a corresponding heuristic: “accumulate X”. That heuristic is useful exactly when relaxing the constraint on X is useful. </span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">All of our resource accumulation examples can be viewed as heuristics of that same form: “accumulate X”. Each of them has a corresponding constraint relaxation: “what could the system do if it had more of resource X?”.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">In principle, any formal heuristic can be viewed as a resource. But the examples we addressed above seem more specific than heuristics in general. They share some common features beyond general formal heuristics:</span></div>
<ul style="margin-bottom: 0pt; margin-top: 0pt;">
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Each resource is highly fungible. Energy, currency and time are easy to trade for a very wide range of other things, and other things are easy to trade back into energy, currency, and/or time.</span></div>
</li>
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Each resource can be stored efficiently. Cream is not a good resource for humans to accumulate; it spoils quickly.</span></div>
</li>
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Each resource is scarce. Bacteria need water, and they could accumulate water, but they’re usually surrounded by unlimited amounts of water anyway. No point storing it up.</span></div>
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</ul>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">In some ways, these are just criteria for what makes a good formal heuristic. In order for a formal heuristic to accelerate planning significantly, it needs to be scarce and storable and fungible. In order for something to be a good resource to accumulate, it should be a useful heuristic for planning problems.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Problems. Plural.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Remember where we started this post: we want to detect adaptive systems without necessarily knowing the systems’ objectives in advance. All the resources listed above make good heuristics not just for one problem, but for a wide variety of different problems. Why? What do they have in common, beyond generic formal heuristics?</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">The Ultimate Resource</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Let’s go back to where formal heuristics come from: constraint relaxation. Intuitively, by accumulating resources, by following an heuristic, by relaxing a constraint, a system gives itself more options. That’s why it’s useful to have more energy, more currency, more time: the system can choose from among a wider variety of possible actions. The action space is larger.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">This is the ultimate resource: accessible action space. The more possible actions available to an adaptive system, the better. A good resource to accumulate is, in general, one which dramatically expands the accessible action space. Fungibility, storability, and scarcity are all key criteria for something to significantly expand the action space.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Redux</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Time to go back to the opening question: suppose I run a ridiculously huge Game of Life simulation with random initial conditions. What function can I run on the output in order to detect adaptive system behavior within the simulation?</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">This post has only addressed one tiny piece of that problem: an unknown objective. Later posts will focus more on information processing, learning, and defining the system. But already, we have a starting point.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">We expect optimizing systems to accumulate resources. These resources will be fungible, storable, and scarce in the environment. The system will accumulate these resources in order to expand its action space.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">So what might we look for in the Game of Life? Very different kinds of resources could be useful, depending on the scale and nature of the system. But we would certainly look for statistical anomalies - resources are scarce. Those anomalies should be persistent - resources can be stored. Finally, the extent of those anomalies should grow and shrink over time - resources are acquired and spent.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">It’s not much, but it’s a starting point. Hopefully it suggests a flavor for what sort of things could be involved in research on the subject. Or better yet - hopefully it gives you ideas for better approaches to tackle the problem.</span></div>
<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Next post will talk about how to extract an adaptive system’s internal probabilistic model.</span></div>
John Wentworthhttp://www.blogger.com/profile/00325384976320984888noreply@blogger.com0tag:blogger.com,1999:blog-3971033849266349559.post-40884307070690237672017-06-30T14:30:00.000-07:002017-06-30T14:30:29.294-07:00Technical vs Economic Bottlenecks<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">What were the major barriers faced by the Manhattan project?</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<br /></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">I would point to two broad classes of problems. The first set are </span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: italic; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">economic</span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> challenges: obtaining funding, resources, people with specialized knowledge, coordinating work, and so forth. The second set are </span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: italic; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">technical</span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> challenges: what materials to use, the mechanism of the bomb, all the technical issues required to produce a blueprint. Both of these kinds of problems had to be solved in order for the Manhattan project to succeed.</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<br /></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">In response to my post on <a href="https://seekingquestions.blogspot.com/2017/06/the-scientific-bottleneck.html">the scientific bottleneck</a>, a few people mentioned various research/commentary on bottlenecks to scientific progress. Different people linked me to very different works with very different purposes, but they shared a common theme: the limiting factors to scientific progress boil down to getting knowledge from the people who have it to the people who need it.</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<br /></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">I totally agree with that idea. So why am I writing a series of posts on a “scientific bottleneck” which does not seem particularly related to this problem?</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<br /></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Just like the Manhattan project, scientific progress requires overcoming both economic and technical challenges. I argued in my previous post that the theory of adaptive systems (or lack thereof) is the limiting </span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><i>technical</i></span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> challenge across multiple fields currently on the scientific frontier. But I didn’t address </span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><i>economic</i></span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> challenges in that post at all.</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<br /></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">I’m focused on technical challenges mainly because the major economic bottlenecks to scientific progress are </span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: italic; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">exactly the same</span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> as the major economic bottlenecks in any other industry: <a href="https://seekingquestions.blogspot.com/2017/02/coordination-economy.html">coordination problems</a>. In the linked post, I claimed that coordination problems are the primary bottleneck in nearly every industry today. As a result, if you want to add lots of value to your company, the natural starting point is to look for coordination problems. In particular:</span></div>
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<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Is there information which some people have and other people need?</span></div>
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<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Are there communication difficulties?</span></div>
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<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Are different specialized groups supporting each other as needed?</span></div>
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<a href="http://theorizeit.org/reverse-progress-problem-behavioral-sciences" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">This piece</span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> is one example account of scientific bottlenecks. Its thesis:</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-left: 36pt; margin-right: 36pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">“Behavioral science researchers are now recognizing that it is impossible to find and incorporate all related disciplinary knowledge. … There are simply too many overlapping research areas across disciplines for any single person to integrate or utilize.”</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-right: 36pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">And later:</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-left: 40.5pt; margin-right: 36pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">“a conservative evaluation found 70 differently named self-efficacy constructs, and only eight of these construct names were used more than once.”</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">One more</span>:</div>
<span id="docs-internal-guid-30bd94f5-fae7-32ee-2441-09bf35fb6354"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-left: 36pt; margin-right: 36pt; margin-top: 0pt;">
<span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">“when the independent variables of most of these disciplines are examined, there is enormous overlap.”</span></div>
<div>
<span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;"><br /></span></div>
</span><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Sound familiar? I’m cherry-picking quotes to make a point, but these are pretty representative of the essay. The major economic bottlenecks to scientific progress are:</span></div>
<ul style="margin-bottom: 0pt; margin-top: 0pt;">
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Getting information from people who have it to people who need it.</span></div>
</li>
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Communication difficulties, especially different/obscure terminology.</span></div>
</li>
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Bridging the gap between groups with different specializations.</span></div>
</li>
</ul>
<span id="docs-internal-guid-30bd94f5-fae5-7ffb-5ce7-ffe74f68e41b"></span><br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">If you’re a scientist looking for career advice, this is it: look for coordination problems.</span></div>
John Wentworthhttp://www.blogger.com/profile/00325384976320984888noreply@blogger.com0tag:blogger.com,1999:blog-3971033849266349559.post-10999840733636872162017-06-28T13:22:00.001-07:002017-06-28T13:22:19.563-07:00The Scientific Bottleneck<span id="docs-internal-guid-79a5cb54-f05c-0242-517a-8806f88146ff"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">Imagine you’re in a sci-fi universe in the style of StarTrek or Stargate or the like. You’ve bumped into a new alien species, drama ensued, and now you’re on their ship and need to hack into their computer system. Actually, to simplify the discussion, let’s say you’re the aliens, and you’re hacking into the humans’ computer system.</span></div>
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<span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">Let’s review just how difficult this problem is.</span></div>
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<span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">You’re looking at billions of tiny electronic wires and switches and capacitors. You have a rough idea of the high-level behavior they produce - controlling the ship, navigating via the stars, routing communications, etc. But you need to figure out how that behavior is built up out of wires and switches and electronic pulses and whatnot. As a first step, you’ll probably scan the whole CPU and produce a giant map of all the switches and wires and maybe even run a simulation of the system. But this doesn’t really get you any closer to understanding the system or, more to the point, any closer to hacking it.</span></div>
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<span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">So how can we really understand the computer system? Well, you’ll probably notice pretty quickly that there’s regular patterns on the CPU. At the low level, there’s things like wires and switches. You might also measure the voltages in those wires and switches, and notice that the exact voltage level doesn’t matter much; there’s high voltages and low voltages, and the exact details don’t seem to matter once you know whether it’s high or low. Then you might notice some higher-level structures, patterns of wires and switches which form other standard elements, like memory elements and logic gates. But eventually, you’re going to exhaust the “hardware” properties, and you’ll need to start mapping “software”. That problem will be even harder: you’ll basically be doing reverse compilation, except you’ll need to reverse compile the operating system at the same time as the programs running on it, and without knowing what language(s) any of those programs were written in.</span></div>
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<span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">That’s basically the state of biology research today.</span></div>
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<span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">There’s millions of researchers poking at this molecule or that molecule, building very detailed pictures of small pieces of the circuitry of living organisms. But we don’t seem much closer to decoding the higher-level language. We don’t seem any closer to assigning meaning to the signals propagating around in the code of living organisms.</span></div>
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<span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">Of course, part of the problem is that organisms weren’t written in any higher level language. They were evolved. It’s not clear that it’s possible to assign meaning to a single molecular signal in a cell, any more than you could assign meaning to a single electron in a circuit. There certainly is meaning somewhere in the mess - organisms model their environments, so the information they’re using is in there somewhere. But it’s not obvious how to decode that information.</span></div>
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<span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">All that said, biologists have a major advantage over aliens trying to hack human computer systems: software written by humans is *terrible*. (Insert obligatory Java reference here.) Sure, there’s lots of abstraction levels, lots of patterns to find, but there’s no universal guiding principle.</span></div>
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<span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">Organisms, on the other hand, all came about by evolution. That means they’re a mad hodgepodge of random bits and pieces, but it also means that every single piece in that hodgepodge is *optimized*. Every single piece has been tweaked toward the same end goal.</span></div>
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<span style="font-family: Arial; font-size: 12pt; text-decoration-line: underline; vertical-align: baseline; white-space: pre-wrap;">The Problem: General</span></div>
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<span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">There’s a more general name for systems which arise by optimization: adaptive systems. Typical examples include biological organisms, economic/financial systems, the brain, and machine learning/AI systems.</span></div>
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<span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">Each of these fields faces the same fundamental problem as biology: we have loads of data on the individual components of a big, complicated system. Maybe it’s protein expression and signalling in organisms, maybe it’s financial data on individual assets in an economy, maybe it’s connectivity and firing data on neurons in a brain, maybe it’s parameters in a neural network. In each case, we know that the system somehow processes information into a model of the world around it, and acts on that model. In some cases, we even know the exact utility function. But we don’t have a good way to back out the system’s internal model.</span></div>
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<span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">What we need is some sort of universal translator: a way to take in protein expression data or neuron connectivity or what have you, and translate it into a human-readable description of the system’s internal model of the world.</span></div>
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<span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">Note that this is fundamentally a theory problem. The limiting factor is not insufficient data or insufficient computing power. Google throws tremendous amounts of data and computational resources into training neural networks, but decoding the internal models used by those networks? We lack the mathematical tools to even know where to start. </span></div>
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<span style="font-family: Arial; font-size: 12pt; text-decoration-line: underline; vertical-align: baseline; white-space: pre-wrap;">Bottleneck</span></div>
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<span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">A while ago I wrote <a href="https://seekingquestions.blogspot.com/2017/01/the-hierarchy-of-sciences.html">a post on the hierarchy of the sciences</a>, featuring this diagram:</span></div>
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<span style="font-family: Arial; font-size: 12pt; margin-left: 1em; margin-right: 1em; vertical-align: baseline; white-space: pre-wrap;"><img height="367" src="https://lh3.googleusercontent.com/lY6_QaB6Fg6TuobcLa9pAO6kp6YlvX9muKhVx4YGvqJAjg94FUbqc-ntpxG40Diyav-OYCt1oVLS4VEPH3Gv_rIr7ijw7k1SJYzXemMCjwhnR6ueoewvit2fe-4BBgtFdshKJVaD" style="border: none; transform: rotate(0rad);" width="507" /></span></div>
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</div>
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<span style="font-family: Arial; font-size: 12pt; white-space: pre-wrap;">The dotted line is what I called the “real science and engineering frontier”. The fields within the line are built on robust experiments and quantitative theory. Their foundations and core principles are well-understood, enough that engineering disciplines have been built on top of them. The fields outside have not yet reached that point. Fields right on the frontier or just outside are exciting places to be - these are the fields which are, right now, crossing the line from crude experiments and incomplete theories to robust, quantitative sciences.</span></div>
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<span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">What’s really interesting is that the fields on or just outside the frontier - biology, AI, economics, and psychology - are exactly the fields which study adaptive systems. And they are all stuck on qualitatively similar problems: decoding the internal models of complex systems.</span></div>
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<span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">This suggests that the lack of mathematical tools for decoding adaptive systems is the major bottleneck limiting scientific progress today.</span></div>
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<span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">Removing that bottleneck - developing useful theory for decoding adaptive systems - would unblock progress in at least four fields. It would revolutionize AI and biology almost overnight, and economics and psychology would likely see major advances shortly thereafter.</span></div>
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<span style="font-family: Arial; font-size: 12pt; text-decoration-line: underline; vertical-align: baseline; white-space: pre-wrap;">Questions</span></div>
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<span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">Let’s make the problem a little more concrete. Here are a few questions which a solid theory of adaptive systems should be able to answer.</span></div>
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<li dir="ltr" style="font-family: Arial; font-size: 12pt; list-style-type: decimal; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">How can we recognize adaptive systems in the wild? What universal behaviors indicate an adaptive optimizer?</span></div>
</li>
<li dir="ltr" style="font-family: Arial; font-size: 12pt; list-style-type: decimal; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">There are already strong theoretical reasons to believe that any adaptive system which predicts effectively has learned to approximate some Bayesian model; the history of machine learning provides plenty of evidence supporting the theory as well. Given a fully specified adaptive system, e.g. a trained neural network, how can we back out the Bayesian model which it approximates?</span></div>
</li>
<li dir="ltr" style="font-family: Arial; font-size: 12pt; list-style-type: decimal; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">Bayesian models are constrained by the rules of probability, but we can also add the rules of causality. How can we tell when an adaptive system (e.g. a neural net) has learned to approximate a causal model, and how can we back out that model?</span></div>
</li>
<li dir="ltr" style="font-family: Arial; font-size: 12pt; list-style-type: decimal; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">Outside of machine learning/AI, utility functions are generally unknown. We know that e.g. a bacteria is evolved to maximize evolutionary fitness, but how can we estimate the shape of the fitness function based on parameters of the optimized system?</span></div>
</li>
<li dir="ltr" style="font-family: Arial; font-size: 12pt; list-style-type: decimal; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">Under what conditions will an adaptive system learn models with levels of abstraction? How can those abstractions be translated into something human-readable?</span></div>
</li>
<li dir="ltr" style="font-family: Arial; font-size: 12pt; list-style-type: decimal; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">Once the fitness function and internal models used by a bacteria have been decoded, how can new information or objectives be passed back into the cell via chemical concentrations or genetic modification? More generally, how can human-readable information (including probabilities, causal relationships, utility, and abstractions) be translated back into the parameter space of an adaptive system?</span></div>
</li>
</ol>
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<span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">Obviously this list is just a start, but it captures the flavor of the major problems. Over the next few weeks, I’ll have a few more posts on specific issues and possible approaches to these problems. </span></div>
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</span>John Wentworthhttp://www.blogger.com/profile/00325384976320984888noreply@blogger.com1tag:blogger.com,1999:blog-3971033849266349559.post-92017557984446420942017-06-19T12:24:00.002-07:002017-06-28T17:56:07.497-07:00Prerequisites for Universal Basic Income<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">When I hear people talk about UBI, they often paint a picture of a future in which most labor has been automated, from agriculture to shipping to construction to manufacturing. A handful of people can produce everything needed to support the entire population. That handful of people are rewarded handsomely, and the rest of the population lives out their days in leisure, supported by UBI.</span></div>
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<b id="docs-internal-guid-9528343b-f061-84e6-3c6e-2b590c9b19d8" style="font-weight: normal;"><br /></b></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Generally speaking, I like that picture. It leaves out important questions, like what the majority of the population does with their time, but that’s a question for another day. It certainly seems silly to have an economy in which most people work jobs they hate, when you could have an economy in which most people don’t need to work at all unless they want to.</span></div>
<div dir="ltr" style="line-height: 1.656; margin-bottom: 0pt; margin-top: 0pt;">
<b style="font-weight: normal;"><br /></b></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">On the other hand, that picture depends on very high productivity, driven by very high automation of labor. In the middle ages, it would not have been possible to build this sort of UBI-society, because the vast majority of the population needed to work just to produce enough food to feed everyone. If most people need to work just to keep everyone alive, then no amount of clever distribution is going to create a society of leisure.</span></div>
<div dir="ltr" style="line-height: 1.656; margin-bottom: 0pt; margin-top: 0pt;">
<b style="font-weight: normal;"><br /></b></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">But where’s the line? Somewhere between the middle ages and the future, UBI should be possible… but how can tell whether we’ve passed that line yet? And what happens if we try to institute UBI before crossing that line?</span></div>
<div dir="ltr" style="line-height: 1.656; margin-bottom: 0pt; margin-top: 0pt;">
<b style="font-weight: normal;"><br /></b></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Key Pieces</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">I sat down at one point and worked out the math for UBI in a very simple model economy. The answer was, in retrospect, pretty intuitive. The key questions are (1) how many people need to work, and (2) what motivates those people to work? Conceptually, the logic goes like this:</span></div>
<ol style="margin-bottom: 0pt; margin-top: 0pt;">
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: decimal; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Enough people need to work to produce and distribute all the necessary goods needed by the population as a whole. This includes food, housing, medical, military/police, etc.</span></div>
</li>
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: decimal; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Extra goods, above and beyond those consumed by the general populace, must be produced in order to incentivize the workers to work. Additional workers are needed to produce these incentive goods. Enough must be produced for both the workers producing necessary goods, and the additional workers who are producing the incentive goods.</span></div>
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</ol>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The key piece here is that, under UBI, nobody is forced to work - everyone has the option of simply not working, and everyone can live a comfortable life without working. But at the same time, we need </span><span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: italic; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">some</span><span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> people to work - the economy isn’t 100% automated, and worker productivity isn’t infinite. So we need a positive incentive to convince people to work - people who work must be able to afford some goods which are not available to the populace as a whole, </span><span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: italic; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">and</span><span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> those goods must be attractive enough to motivate working rather than not working, </span><span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: italic; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">and</span><span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> the incentive goods must attract enough people to produce both necessary and incentive goods.</span></div>
<div dir="ltr" style="line-height: 1.656; margin-bottom: 0pt; margin-top: 0pt;">
<b style="font-weight: normal;"><br /></b></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Note that the UBI amount is a key variable here. Is the UBI amount set to include internet and cell service? Travel? A car? Every additional good provided to the population as a whole requires more people to work in order to produce that good. On the other hand, every good provided to the population as a whole is one less good to serve as incentive. There has to be things which workers can afford, but non-workers cannot - otherwise there’s no incentive to work. As UBI amount goes up, more workers are needed but fewer people will work. Economically, the more goods covered by the UBI amount, the higher productivity and more automation required in order for that UBI amount to be possible.</span></div>
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<b style="font-weight: normal;"><br /></b></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Failure Modes</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">To make these requirements more intuitive, I’ll outline what happens when UBI fails, i.e. when UBI is implemented without meeting the economic prerequisites.</span></div>
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<b style="font-weight: normal;"><br /></b></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Scenario: One Time Inflation</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">In this scenario, UBI is set to some fixed dollar amount, sufficient to live comfortably at pre-UBI prices. As soon as UBI is put into effect, most of the population quits their job. Prices skyrocket across the board, reflecting shortages in every good. Wages also skyrocket, with companies desperate to fill positions.</span></div>
<div dir="ltr" style="line-height: 1.656; margin-bottom: 0pt; margin-top: 0pt;">
<b style="font-weight: normal;"><br /></b></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Very quickly, prices on consumer goods increase enough that the UBI amount no longer covers living costs. The population reluctantly returns to work, and the economy basically ends up where it started. Inflation has rendered the UBI amount too small to have a significant impact.</span></div>
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<b style="font-weight: normal;"><br /></b></div>
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<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Scenario: Runaway Inflation</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">In this scenario, UBI is indexed to inflation. As before, everybody quits, prices shoot up, etc. But this time, every few months, the UBI amount jumps up to reflect price growth.</span></div>
<div dir="ltr" style="line-height: 1.656; margin-bottom: 0pt; margin-top: 0pt;">
<b style="font-weight: normal;"><br /></b></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">This won’t make a substantive difference. Everybody knows the UBI will increase, so prices stay ahead of it. As before, the economy ends up roughly where it started, except inflation is so high we have to ask Zimbabwe to return our wheelbarrow.</span></div>
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<b style="font-weight: normal;"><br /></b></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Scenario: Price Controls</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">In the worst case, price controls are instituted. Now people quit their jobs, don’t go back, and things get very ugly. The economy does not produce enough goods for everyone, and prices cannot adjust, leading to shortages. Food riots are likely.</span></div>
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<b style="font-weight: normal;"><br /></b></div>
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<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Political Failure Mode</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">There’s one more important failure mode, separate from the economic failure modes above. In this case, the economy is capable of supporting UBI, but there’s no </span><span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: italic; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">politically</span><span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> stable equilibrium.</span></div>
<div dir="ltr" style="line-height: 1.656; margin-bottom: 0pt; margin-top: 0pt;">
<b style="font-weight: normal;"><br /></b></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">As before, UBI is set to some fixed amount, sufficient to live comfortably at pre-UBI prices. Lots of people quit their jobs, prices go up, but it’s not a full failure. Enough people still work, and the UBI amount is still enough to live off.</span></div>
<div dir="ltr" style="line-height: 1.656; margin-bottom: 0pt; margin-top: 0pt;">
<b style="font-weight: normal;"><br /></b></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">But now a huge chunk of the population has lots of time on their hands and not much to do. Maybe they want to travel, but the UBI amount isn’t enough to travel much. Maybe they want to take classes in music or a language, but the UBI amount won’t cover that either. Maybe they just want to eat out more often.</span></div>
<div dir="ltr" style="line-height: 1.656; margin-bottom: 0pt; margin-top: 0pt;">
<b style="font-weight: normal;"><br /></b></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">One way or another, a huge chunk of the population is left with lots of time on their hands, and they’re all going to want more money for </span><span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: italic; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">something</span><span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">. They may not want more money badly enough to work, or they may not be able to work, but they’ll still vote. So every politician with a hope of winning is going to promise to raise the UBI amount.</span></div>
<div dir="ltr" style="line-height: 1.656; margin-bottom: 0pt; margin-top: 0pt;">
<b style="font-weight: normal;"><br /></b></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">It shouldn’t take much imagination to see that, in a country like e.g. the US, the UBI amount is going to increase and keep increasing. Sooner or later, it will cross the threshold, and the economic failure modes discussed above will kick in. Politics will raise the UBI amount, inflation will kick in to effectively lower it, back and forth, back and forth. That’s a stable equilibrium, and not a terrible one, inflation aside. But it’s only a matter of time before some clever politician tries to outsmart inflation, and the food riots kick in.</span></div>
<div dir="ltr" style="line-height: 1.656; margin-bottom: 0pt; margin-top: 0pt;">
<b style="font-weight: normal;"><br /></b></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">I see two solutions where politics won’t likely ruin UBI.</span></div>
<div dir="ltr" style="line-height: 1.656; margin-bottom: 0pt; margin-top: 0pt;">
<b style="font-weight: normal;"><br /></b></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The first is less-ambitious UBI, intended more to replace welfare than to overhaul the economy. In this case, people able to work are generally expected to keep working, and the UBI amount is intentionally limited to a living wage, not intended for comfortable living. The key here is that living off UBI would have to be tight enough that pretty much everyone would prefer to work if they can. This would still need to meet the economic prerequisites, but with most of the population still working, hopefully the political issues wouldn’t be a limiting factor.</span></div>
<div dir="ltr" style="line-height: 1.656; margin-bottom: 0pt; margin-top: 0pt;">
<br /></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The other solution is when automation is so complete that hardly any people are needed. If only a thousand people need to work to support the entire population, then we could plausibly get a thousand people to just volunteer, without needing extra goods to incentivize them. We’re certainly nowhere near that point today - even just looking at food distribution, we’d never get enough volunteers to drive all the big rigs needed. But it’s not out of the question for the future.</span></div>
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John Wentworthhttp://www.blogger.com/profile/00325384976320984888noreply@blogger.com0tag:blogger.com,1999:blog-3971033849266349559.post-38345887943661791282017-06-12T13:14:00.000-07:002017-06-12T13:16:18.576-07:00Be More Evil<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: 400; vertical-align: baseline; white-space: pre-wrap;"><i>Spoiler warning: significant spoilers for Avengers: Age of Ultron.</i></span><br />
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: 400; vertical-align: baseline; white-space: pre-wrap;"><i><br /></i></span>
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">The Road to Hell</span></div>
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<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Everyone thinks of themselves as a hero of the story.</span></div>
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<br /></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Gandhi thought of himself as a good person. So did Lenin. So has every president of the United States, from Jackson to Lincoln to FDR. Your parents see themselves as good. Your annoying neighbors see themselves as good. Everyone sees themselves as good.</span></div>
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<br /></div>
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<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">This is a problem.</span></div>
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<br /></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">People tend to model their identity - and their life - after stories. Alas, the tropes which make fun stories are not representative of the real world. People grow up with stories of heroes fighting villains, heroes fighting monsters, heroes fighting alien invaders. In the stories, nine times out of ten the problems are caused by antagonists. So of course, people turn to the real world, and they see problems, and they look for antagonists. They blame society’s problems on the rich, the politicians, the religious, the sinful, etc.</span></div>
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<br /></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">We’re a world full of heroes in search of villains.</span></div>
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<br /></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">What if what we really need is more villains?</span></div>
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<a href="http://tvtropes.org/pmwiki/pmwiki.php/Main/GoodIsDumb" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Good is Dumb</span></a></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Remember that scene in Avengers: Ultron, where Tony and Cap argue about how best to defend the world from invasions by alien armies? Tony argues that Earth has no viable defense against an invasion, and Cap argues that the Avengers can handle it.</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
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<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Really? Six people? How are six people going to stop an invading army?</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">“Together”, replies Cap, against a backdrop of dramatic music.</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Yeah. Great plan ya got there, Cap. All that togetherness makes for a real solid planetary defense strategy.</span></div>
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<div class="separator" style="clear: both; text-align: center;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-weight: 400; margin-left: 1em; margin-right: 1em; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><img height="436" src="https://lh6.googleusercontent.com/Hfk8GtCZrDfRt2dJyI7vSYS6X3PBMlPa7Xfn8WBgWae65ERLuPNUR-1E2qB-wt9a_JMyhw610HlPSc3Wvw2Cs-xCSGFk9DJ3q96REoizydfX3YT29iYPhskgSyCd3nlc3aixnV4A" style="border: none; transform: rotate(0rad);" width="236" /></span></div>
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<br /></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">But it’s not Cap being a moron that’s notable here. Heroes act that stupid more often than not. What’s really surprising is that one of the </span><span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: italic; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">good</span><span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> guys - Tony - is </span><span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: italic; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">not</span><span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> a complete moron. Normally, it would be a villain’s job to point out that six people and some togetherness do not constitute a military defense strategy.</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">But it’s not a total departure from literary norms - Tony’s unusual common sense is portrayed as a character flaw. Tony overcoming that character flaw is one of the main lines of character development in the film, as well as the following Iron Man III film. </span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Apparently the only way a superhero is allowed to display real intelligence is as a character flaw.</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<br /></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">What’s really alarming about all this, is that these are the stories which people use to model their own identities… and everyone thinks of themselves as a hero. We have a world full of people trying to be Captain America, people who want to save the world by (usually metaphorically) punching villains in the face. If the punching doesn’t work, then maybe we need some more togetherness?</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<br /></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">They say politics is the mind-killer, but it’s broader than that. Morality is the mind killer. Everyone is trying to be the hero, and the vast majority of the heroes we see are morons. It’s no surprise that the moment morality comes up, everyone scrambles to grab the </span><a href="http://tvtropes.org/pmwiki/pmwiki.php/Main/IdiotBall" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">idiot ball</span></a><span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">.</span></div>
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<br /></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Trolley Problems</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">In addition to behaving like morons in general, heroes have a contractual obligation to make very poor decisions in certain situations.</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<br /></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Going back to Ultron, there’s a </span><a href="https://en.wikipedia.org/wiki/Trolley_problem" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">trolley problem</span></a><span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> near the end of the film. The villain is levitating a mid-size city. Once it gets high enough, the villain plans to drop it, generating a big enough boom to wipe out Europe (or something like that). Tony suggests nuking the whole thing while it’s still near the ground. Cap says “No! There’s civilians in that city, we need to evacuate them!”. Of course, there’s no real doubt for the viewer - everyone knows they’re going to evacuate the city first. When a hero faces a trolley problem, they save the baby and then punch the trolley in the face.</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<br /></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Heroes, in general, are very bad at tradeoffs. Mosquito nets can save a life for </span><a href="http://www.givewell.org/international/technical/programs/insecticide-treated-nets#HowcosteffectiveisLLINdistribution" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">something like $5000</span></a><span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">, but what hero would leave a baby on a train track in order to save a briefcase full of money? It’s hardly surprising that most altruism is so ineffective, when everybody’s trying to mimic heroes who have no idea how to handle tradeoffs.</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<br /></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Planning Ahead</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The nature of fiction dictates that protagonists mostly be reactive, rather than proactive.</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<br /></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">When the hero sets out to foil the villain’s dastardly plan, they don’t know the plan yet. The plan is a mystery, gradually revealed over the course of the story. It makes for a good story.</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<br /></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The converse would be a hero making a plan. Imagine: the first half of the story consists of the hero running various scenarios and putting backup plans in place for each of them. Finally, the plan actually kicks off, and the second half of the story consists of watching the plan work more or less as outlined earlier.</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<br /></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">You know what we call that? A heist story. Funny coincidence, the genre where the protagonists plan things is also the genre where the protagonists are villains.</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<br /></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Heist stories aside, hero plans do not usually make for a good story. At most, they are small in scope, limited to laying a trap for the villain. Villains have plans, heroes try to break them; that’s how the story works.</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<br /></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">When people try to act heroic, their first thought is not “you know what we need? A plan!”. Maybe they’ll throw together a small plan to stop their perceived villain, but nobody sits down to write a detailed, quantitative plan to eliminate poverty.</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<br /></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">And if someone did write a detailed, quantitative plan to eliminate poverty, they would </span><a href="https://parahumans.wordpress.com/cast-spoiler-free/" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">probably be a villain</span></a><span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">.</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<br /></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Join the Dark Side</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Time for the pitch.</span></div>
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<br /></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Join the dark side! You’ll immediately receive:</span></div>
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<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">15 IQ points!</span></div>
</li>
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Special Ability: Make Tradeoffs! (Includes: Resistance to </span><a href="https://en.wikipedia.org/wiki/Dutch_book" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Dutch Book</span></a><span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> Attacks!)</span></div>
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<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Special Ability: Plan Ahead more than Five Minutes!</span></div>
</li>
</ul>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">… and many other bonuses.</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<br /></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">You don’t need to take over the world. You don’t need a </span><a href="https://www.reddit.com/r/evilbuildings/" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">secret lair</span></a><span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">. You just need to ask yourself - what would a villain do? When faced with a problem, you just need to consider the Evil approach.</span></div>
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<br /></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Even if your goal is world peace, or eliminating poverty. Villainy does not judge you on your aims, only on your methods. Ruthless efficiency, the pursuit of your objective above all else, doing what works - that is what the Dark Side is all about.</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<br /></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">So the next time you want to do something about poverty, don’t volunteer at the soup kitchen or march to “spread awareness” or write a scathing facebook post about Bad People. That won’t fix poverty. Instead, do what a villain would do. Sit down and research the problem. Learn the underlying causes. Run the numbers. Make a detailed, quantitative plan. Find a devious way to make people help, whether they want to end poverty or not. If you need resources, acquire them. Make the necessary tradeoffs. And above all, be smart - it’s not about punching Bad People in the face, it’s not about togetherness or love, it’s about achieving the goal.</span></div>
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<span id="docs-internal-guid-65f692c5-9dee-d2b0-7ba7-3e9bff905999"></span><br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Ruthlessly.</span></div>
John Wentworthhttp://www.blogger.com/profile/00325384976320984888noreply@blogger.com1tag:blogger.com,1999:blog-3971033849266349559.post-2689926249268192772017-06-07T12:00:00.000-07:002017-06-07T12:00:12.546-07:00Be More Amoral<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-family: Arial; font-size: 12pt; text-decoration-line: underline; white-space: pre-wrap;">Morality Projection</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-left: 36pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">“If everyone cared and nobody cried</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-left: 36pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">If everyone loved and nobody lied</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-left: 36pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">If everyone shared and swallowed their pride</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-left: 36pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Then we'd see the day when nobody died”</span></div>
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<span style="font-family: Arial; font-size: 12pt; white-space: pre-wrap;">- I have officially sunk to quoting Nickelback</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Intuitively, humans tend to think that bad things happen because of bad people. If only everyone were caring and loving and humble and shared with each other, then cancer would be magically cured. Apparently technical issues ranging from cytokine signals to senescence-autophagy choice to drug specificity can all easily be resolved by sufficient loving and sharing.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Of course, it sounds completely stupid when you put it like that, but Nickelback just takes the usual stupidity and stretches it into hyperbole. Ever notice how people think marching in the street will somehow make it easier to cure cancer?</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">I call this sort of thinking morality projection. People think of the world in terms of Good and Bad: doing Good things will cause everybody to be happier and healthier and generally better off, while doing Bad things will cause everybody to be sadder and die sooner and be generally worse off. Conversely, if people are unhappy, it must be because of Bad People doing Bad things, or at least not enough Good People doing Good things.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">This post is about how to avoid morality projection in your own thinking.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Taboo Morality</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">A few years ago, I decided to taboo all moralizing terms in my own head, just as an experiment for a week. If I caught myself thinking “X is good”, then I had to cross out that thought and replace it with “I would like X” or “X would result in Y, which I would like” or “X would result in Y, which lots of people would like”. Similarly with “X is bad”, or right/wrong, or “should”. Especially “should” - that one was particularly insidious. The goal was not simply to replace morally-flavored words, but to reduce moral concepts down to peoples’ preferences wherever they appeared.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">I was shocked by the extent of morality projection in my own head. I was expecting political thoughts to be the main offender, but there was so much more - choices of food, clothing, social interaction, work habits, sleep schedule, financial habits... moralization was hiding everywhere. Everywhere were long-since-absorbed social lessons on the “right” thing to eat or to wear, “good” habits, all the little things one “should” do. All these lessons, absorbed when I was too young to question them, were suddenly thrust back into my awareness and re-examined.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Of course, I also started to notice morality projection in others - and I started to notice myself projecting on others as well. I caught myself thinking of others as “bad” when they engaged in “bad” habits, or ate the “wrong” foods, or didn’t act as they “should”. Even after recognizing the flaws in many of society’s lessons, it’s still hard to adjust your standards of others accordingly.</span></div>
<b style="font-weight: normal;"><br /></b>
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<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Halfway through the week, I knew this experiment had to become permanent. Turns out, a large chunk of the little things society teaches us are either pointless, situational, or just plain counterproductive.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">I’m not going to write out a long list here, because people will just argue with it. When you’ve been trained from childhood to view some foods as good and others as bad, some habits as good and others as bad, and so forth, challenges to that worldview just trigger cached responses. I bet most of the people reading this got fired up when I criticized marching for cancer, for instance.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">So I’ll just say this: try it. Just try it for a week. Taboo all the little “good” and “bad” and “should” thoughts, ask yourself whether each little thing actually achieves something you want.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Here are some examples to start off:</span></div>
<ul style="margin-bottom: 0pt; margin-top: 0pt;">
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">“X is a good idea” -> “X would make it easier to achieve goal Y”</span></div>
</li>
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">“X is bad” -> “X would make lots of people unhappy”</span></div>
</li>
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">“I should do X” -> “X would make it easier to achieve goal Y” </span></div>
</li>
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">“I should do X” -> “X would make it easier to achieve lots of my goals”</span></div>
</li>
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">“I should do X” -> “If I don’t do X, lots of people will be angry at me”</span></div>
</li>
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">“They should do X” -> “If they do X, it will make it easier to achieve goal Y”</span></div>
</li>
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">“They should do X” -> “X needs to be done in order to achieve Y, and it will be easiest for them”</span></div>
</li>
</ul>
<ul style="margin-bottom: 0pt; margin-top: 0pt;">
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">“X is healthy” -> “X has high vitamin content”</span></div>
</li>
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">“X is polite” -> “X avoids confrontation”</span></div>
</li>
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">“X would be a nice thing to do” -> “X would make someone feel happy, which is something I want”</span></div>
</li>
</ul>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">In general, replace anything that conveys a positive feeling without a specific physical interpretation. Words like “good”, “should”, “healthy”, “polite”, “nice”, etc all feel positive, but don’t mean anything specific. Phrases like “I want” or “they want” are fine, emotions are fine, anything with a specific physical meaning is fine.</span></div>
<br /><span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">One final note. Some clever person is bound to say “Why don’t we just define ‘good’ as whatever makes people happier/live longer/generally better off?” That is a perfectly decent definition of “good”, but it doesn’t necessarily have anything to do with any of the things we usually consider “good” or otherwise virtuous. So you’re welcome to define good that way, but you’ll still need to go through and check that all the things we usually think of as “good” meet the new definition… and that’s going to be a lot harder with an overloaded word floating around.</span>John Wentworthhttp://www.blogger.com/profile/00325384976320984888noreply@blogger.com0tag:blogger.com,1999:blog-3971033849266349559.post-80431015219213753392017-05-31T12:56:00.000-07:002017-05-31T12:56:57.789-07:00Economics of College Cost<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-family: Arial; font-size: 12pt; white-space: pre-wrap;"><i>This post builds on two <a href="https://seekingquestions.blogspot.com/2017/03/accounting-for-college-costs.html">prior</a> <a href="https://seekingquestions.blogspot.com/2017/05/college-costs-part-ii.html">posts</a>. However, this post can be read standalone, especially if you're more interested in the conclusions than in the data.</i>
Quick recap:</span></div>
<ul style="margin-bottom: 0pt; margin-top: 0pt;">
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The question is why the cost of college has risen much faster than inflation for almost 40 years, with relatively little increase in quality.</span></div>
</li>
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">There’s really two questions in there. First, there’s an accounting question: where is all the extra money going? Second, there’s an economics question: knowing where the extra money is going, why is it going there?</span></div>
</li>
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The <a href="https://seekingquestions.blogspot.com/2017/03/accounting-for-college-costs.html">first post</a> addressed the accounting part, mainly using data on 4-year private nonprofit colleges from the Digest of Education Statistics, running from 1999-2013.</span></div>
</li>
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">A large mismatch between sticker-price tuition and tuition revenue confirms what private college students know: sticker price isn’t what’s actually charged. Real tuition charges have grown at about half the rate of sticker price, although that’s still after adjusting for inflation.</span></div>
</li>
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">All the extra tuition money has gone to paying faculty and staff. The growth in per-student expenditure is mostly driven by decreasing student/faculty (and probably student/staff) ratio. Faculty salary has also increased a bit faster than inflation.</span></div>
</li>
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Based on some <a href="https://seekingquestions.blogspot.com/2017/05/college-costs-part-ii.html">quick statistics</a> on Berkeley’s old course catalogues, the extra faculty per student are fueling a cambrian explosion in academic courses.</span></div>
</li>
</ul>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">So we have a pretty good idea of where all the extra money is going: students today face a much wider buffet of course options, which requires more faculty per student. That’s the “what?” part. This post tackles the “why?” part, moving our view from trees to forest.</span></div>
<b id="docs-internal-guid-2514e6a5-5f8d-bf61-104b-bb69e0299399" style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Our main driving question is this: why doesn’t somebody just set up a college that teaches roughly the same courses as back in the 70’s, with roughly the same student/faculty ratio, and charge half as much as the rest of today’s colleges?</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">There’s a few pieces to the puzzle.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Signalling</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">We’ll start with the low-hanging fruit. College education is </span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: italic; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">the</span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> textbook example of signalling - the <a href="https://www.amazon.com/Games-Information-Introduction-Game-Theory/dp/1405136669">game theory text</a> at the foot of my bed spends the first half of the signalling chapter just on that. The standard education signalling game won’t provide all the pieces we need, but it will provide the main framework for reasoning about the problem.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Here’s the usual setup: we have two players, an employer and a prospective worker. For simplicity, there are two types of workers: high value workers (more intelligent, more diligent, follow directions, whatever) and low value workers (opposite of all that). All else equal, the employer would rather hire a high value worker than a low value worker, but it’s hard to tell them apart in interviews. It’s not like the employer can just ask “hey, are you smart and diligent?” because everybody will just say yes.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">What the high value workers really want is some way to signal to the employer that they’re high value. That’s where college comes in: obtaining a degree is a lot easier for people who are more intelligent, more diligent, follow directions, etc. So the high value workers go get a degree, and now the employer can tell high value workers apart from low value workers by asking whether they have a degree. Since the employer wants high value workers more, they get offered more money.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Of course, this is the dramatically over-simplified version. Pick up a game theory textbook if you want to build up a more realistic model.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Framework</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The signalling model of education quickly leads into a general framework.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">From an economic standpoint, the primary function of post-secondary education is filtration. Ever wondered why so many people pay so much money for a college education, when the vast majority of the material they learn is never used in the workplace? Well, there’s your answer: the things learned aren’t relevant. The main economic purpose of higher education is not to acquire knowledge, but to signal intelligence/diligence/direction-following/etc.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">This is hardly novel; it’s the default assumption among the small portion of education researchers who actually bother with statistics. Researchers tend to focus more on high school than college, but the same idea applies: education isn’t about learning, it’s about filtering. </span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">There’s an endless stream of idiots in education research saying things like “hey look, top-scoring schools all have lots of trees!”. Then the people who bother with statistics say “yes, but if you account for top-scoring schools having higher-scoring students coming in, then the trees don’t have any significant effect.”. Then the idiots ignore them, and go on a big political campaign to spend hundreds of millions of dollars planting more trees at low-scoring schools. Ten years later, lots of low-scoring schools have more trees, and their scores haven’t improved at all.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Anyway, I digress. If you want more details, here’s </span><a href="http://fredrikdeboer.com/ANOVA/" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">an entire blog</span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> to check out. For our purposes, the takeaway is this: in and of itself, education has very little effect on the sorts of things employers care about. The vast majority of what people learn in college goes unused at work. The economic role of education is not to acquire knowledge, but to filter higher-value workers from lower-value workers.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Furthermore, the difference between “better” and “worse” schools is mainly filtration. Harvard teaches roughly the same material as any state school, but employers pay a premium for Harvard grads because Harvard is pickier in its admissions. This will turn out to be a key piece of the puzzle.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Decoupling</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Back to our main problem: why doesn’t someone start a college which teaches roughly the same subjects as the late 1970’s, at half the cost of other colleges today?</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">One obvious guess is “well, maybe all those new subjects teach new skills which are needed in our ever-diversifying economy”. The signalling framework disagrees, and offers two sanity checks: employers don’t care exactly what you studied, and most of what was covered won’t be used anyway.</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">But this raises a question. Clearly, academic courses and content have little to do with employer needs. So what </span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: italic; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">does</span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> drive courses and content? Why are students so interested in a wild variety of courses that they’re willing to pay double for it?</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">What do colleges want?</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Now for the last key piece: what do colleges want? We’re talking mainly about private nonprofits here, so it’s not like they’re out to make money. College administrators give lip service to all sorts of ideals, but what objectives actually drive their spending?</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Well, we mentioned earlier that from an employer’s point of view, the difference between Harvard and a state school is that Harvard graduates higher-quality students on average, mainly by bringing in higher-quality students in the first place. So… what if that’s the main goal driving college behavior? What if colleges are mainly competing to attract and retain the best students?</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Intuitively, that makes a lot of sense.</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">How do colleges attract and retain the best students? Generous scholarships for top students are one obvious approach. The difference between sticker price and actual tuition paid for college isn’t the main focus of this post, but competition for top students explains it neatly. </span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">But what about the cambrian explosion of courses? My guess is that top students are much more likely than average to have specific academic interests. A college which can provide courses tailored to a student’s particular interests will have a major advantage over a college with a few generic courses. </span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">A college adds a handful of courses in a hot new field, and they attract some excited top students. Other colleges catch on, and begin to offer courses in the hot new thing themselves. The cycle repeats. It’s an arms race to attract the best and brightest by offering courses in the hottest new fields.</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Summary</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Finally, we have a coherent picture. From an economic standpoint, college is about signalling, as we’d expect. Individual colleges are economically incentivized to recruit the best and brightest students they can. Thus the key insight: college is optimized, not for the average students, but for the top students.</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">And then it makes all sorts of sense.</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">What do the top students want? Courses tailored to their interests, and a free ride. What do the top students get? Courses tailored to their interests, and a free ride. The economic weirdness of college cost growth - the cambrian explosion in courses, the divergence between actual cost and sticker price - is a result of competition for top students.</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Zooming out, why is attracting top students the main de-facto goal of most colleges? The signalling model provides an economic answer. The higher the quality of the students a college attracts, the more employers will eventually pay for those students, and the more the college’s degree is worth.</span></div>
<br /><span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">In short: colleges are economically incentivized to optimize for top students, not average students.</span><br />
<span id="docs-internal-guid-2514e6a5-5fd1-b762-b908-f3ce142a3530"><br /><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-family: Arial; font-size: 12pt; text-decoration-line: underline; vertical-align: baseline; white-space: pre-wrap;">Epilogue</span></div>
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<span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">The real point of this whole exercise is not to better understand college cost growth. The real point is that, since we didn’t understand college cost growth, there was probably some key principle missing. By looking at college costs, we hope to dredge up that missing principle, and then generalize it to other domains.</span></div>
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<span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">So let’s formulate the key principle more generally.</span></div>
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<span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;"><br /></span></div>
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<span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">Suppose there’s some class of signalling goods whose main role is to signal X. Maybe X is wealth, maybe X is virtue, maybe X is intelligence, maybe X is hipness, maybe X is membership in some group. The general principle is: under competition, goods used to signal X will be optimized for people with the highest X, not for their average consumer.</span></div>
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<span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">Why? Well, it’s fashion 101. If the cool people do it, everyone else will follow. If the cool people don’t do it, nobody else will either. So, the successful products will be those which optimize for the cool people.</span></div>
<br /><span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">As applied to college, the logic goes like this: colleges which optimize for top students will get the top students. If a college tries to break out and optimize for average students, then they won’t get any top students. Employers will realize this, and will not be very interested in their graduates. Since employers won’t be interested in their graduates, even average students won’t want to attend.</span></span>John Wentworthhttp://www.blogger.com/profile/00325384976320984888noreply@blogger.com2tag:blogger.com,1999:blog-3971033849266349559.post-1388210969041904882017-05-23T15:26:00.002-07:002017-05-23T15:27:08.326-07:00User Adoption Energetics<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: italic; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">I’m pretty sure this idea isn’t new, but I can’t find another source talking about it directly. I think I got it from a Yudkowsky essay talking about venture investing.</span></div>
<span id="docs-internal-guid-c1f34402-376a-e0a8-d28f-ff334777ba5b"><br /><span style="font-family: "arial"; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">There’s a strong analogy between the rate of a chemical reaction, and the rate at which new users adopt an app.</span></span><br />
<span style="font-family: "arial"; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;"><br /></span>
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<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Chemistry</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">In chemistry, there’s a standard picture of the energy in a reaction:</span></div>
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<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><img height="320" src="https://lh4.googleusercontent.com/0CWZvnjCzhxgXBH_j7OEnskw4kXZ__WWEOgU1pdOkGMx_jOUitHQQYtNCIt15GgYs9k7WfCp9mnKulreZ7HXDCxyF7vWz3dhoeFqdyZM5bKVyOd7Br_X0P4IbhEqygQLIgdB-LXi" style="-webkit-transform: rotate(0.00rad); border: none; transform: rotate(0.00rad);" width="464" /></span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Here’s the idea in english. Imagine the chemicals in the reaction as a bunch of balls sitting on the flat part of the curve pictured, right above “reactants”. The big hill, called the energy barrier, keeps them in place. If the big hill were removed, the balls would all roll down to the right, where it says “products”. In physical terms, when a ball crosses the hill and rolls down the other side, it represents a few reactant molecules turning into product molecules.</span></div>
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<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">But the balls don’t just sit there. In real life, there’s heat! It’s like we’re shaking the balls around. Shake hard enough, and they’ll start to bounce up over the hill; the reactants will turn into products. The harder we shake (i.e. the more heat we add), the faster balls will bounce over the hill, and the faster the reactants will turn into products.</span></div>
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<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">But shaking doesn’t just turn reactants into products. Shake enough and, every once in a while, a ball from the product side will bounce back to the reactant side. This is a reverse reaction - products turning back into reactants. If the reactants are much higher in energy than the products, then balls will bounce forward much more than backward. But if the two sides are about even - if reactants and products have about the same energy - then the balls will bounce backward just as often as forward.</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Product and UI</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">We can use exactly the same model for user adoption of a product, e.g. an app.</span></div>
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<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Now, the balls represent potential users. People on the “reactants” side are not yet users; people on the “products” side have fully adopted the product. In between, there’s a hump - the energy barrier which a potential new user must cross.</span></div>
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<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Generally, we want to get everyone to adopt our product. In order to make that happen, we need two things.</span></div>
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<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">First, we want to make the energy barrier as low as possible. In other words, make it easy for new users to adopt the product. Things like a steep learning curve or long onboarding flow or upfront cost make the energy barrier higher. A lot of UI design, especially for onboarding, is focused on making that barrier lower.</span></div>
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<br />
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: "arial"; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">But the energy barrier is only half the equation. We also need the “products” to have much lower energy than the “reactants”. In other words, our users need to get lots of value out of the product once they’ve adopted it. If the users are about equally happy between using the product or not, or if they’re happier without the product, then they’ll just bounce back to the other side. We’ll see high “churn”, with lots of users leaving.</span></div>
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<span style="font-family: "arial"; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">In chemistry, a strong reaction requires two pieces: low activation energy and a big energy drop. A successful product requires the same two pieces: low activation energy (easy acquisition/onboarding) a big energy drop (value for the user). If either one of those is missing, then the product will not see much use.</span>John Wentworthhttp://www.blogger.com/profile/00325384976320984888noreply@blogger.com0tag:blogger.com,1999:blog-3971033849266349559.post-39263216323032849522017-05-20T17:33:00.002-07:002017-05-20T17:33:57.616-07:00Thoughts From China<b id="docs-internal-guid-719fa241-2853-a847-07ba-e50a67acb0d8" style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">I recently returned from my third trip to Shanghai, so I wrote up a post with a bunch of idle thoughts from the trips - with photos!</span></div>
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<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Shanghai Startup Scene - The Tank Problem</span></div>
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<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><img height="267" src="https://lh5.googleusercontent.com/TlIs2GMOZGfD0BoLyG-ZFIW90lvKauOLg6vw6tySpgiiNJTxqxEl9DcrLS9M9rRKkI5whziiZSbYBL-LI8HuwC0gqF9L4HydCHU7-s5Z1UPNcpunxEs-bKoFo1LLVGmbGM1Xyps6" style="border: none; transform: rotate(0rad);" width="400" /></span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">This picture isn’t mine, but during my previous trip to Shanghai (September 2016), these orange bikes were </span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: italic; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">everywhere</span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">. They’re owned by Mobike, a bike rental startup. You walk down the sidewalk until you find one of their bikes sitting around, scan the QR code on the bike to pay, the bike unlocks, and you ride off. When you get where you’re going, just re-lock the wheel and leave the bike.</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Anyway, note the prominent serial number by the back wheel - the bike pictured is number 10748. So naturally, my idle thoughts drifted to </span><a href="https://en.wikipedia.org/wiki/German_tank_problem" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">the tank problem</span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">.</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">As the story goes, the tank problem arose in WWII. The allies wanted to estimate how many tanks the Germans had available, so they looked at serial numbers on captured tanks. So, for instance, if they saw a serial number of 10748, then they knew that there were at least 10748 tanks out there. With a little Bayesian stats magic, they were able to get much more precise estimates - so precise that, after the war, it turned out the statistical estimates based on serial numbers were more accurate than the estimates from spies!</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Back to Shanghai. I kept an eye on serial numbers of the orange bikes, and came up with a rough estimate of 42,000 bikes. </span></div>
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<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Shanghai Startup Scene - Defensible Differentiation</span></div>
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<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><img height="296" src="https://lh6.googleusercontent.com/LfsngDaZtKa5m2-h6heSyZYQgYOdOs8r6pTDqt30em0RzdmhkptcuslWaRB1hhVUTwzeWGeqvXrCzn40wI_7MzmcQeGqOsgrCAJehukGarTe4dndAj0yIwqzi21gKQdsvrPqyteZ" style="border: none; transform: rotate(0rad);" width="400" /></span></div>
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<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">When something works, people copy it. Sure enough, in the roughly 8 months between my 2016 trip to Shanghai and my most recent trip, Mobike had sprouted a competitor - at least four competitors, in fact, each with a different bike color. Judging by number of bikes, the competition was mostly between first mover Mobike (orange) and newcomer Ofo (yellow).</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">My guess is that both companies are burning cash like crazy. With competition this stiff, they can’t both expect to stay in business. Assuming most customers have both apps and grab whichever bike is closest, this is a battle of who can put the most bikes on the street without going bankrupt. Heck, if these two companies can raise enough capital, Shanghai may soon have more bikes than people - it’s in both their best interest to keep putting bikes on the road until the other folds, even past the point where each bike is profitable.</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">But the real game here is product differentiation - if one company can present an easier lock or a better bike, then people will choose their bike rather than grabbing whatever’s closest, and that company will not need to compete for most bikes on the road. Indeed, at least one company has taken this route: another company offers green bikes, not pictured here, with a small electric motor on them. Of course, their product differentiation isn’t defensible either - someone else could come along and offer electric bikes too.</span></div>
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<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Real Interest Rates</span></div>
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<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><img height="400" src="https://lh3.googleusercontent.com/Oy3RMdb7ix3R0-kCk22Zc_1YWIgBuKimsd_qGPk0wAq_De_pS4Kn2ZD3Wkoq6i2iNmV9mG_LigFxDYC0jH-m0PW7l1MTlo0cppfMTMgn5APdDI-DD-4fHHnCo4PS0QcZgkK7l40Q" style="border: none; transform: rotate(0rad);" width="297" /></span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Among the interesting sights in China were stores like this - less than a hundred square meters of floor space, with backpacks covering all the wall surface and piled ten deep on the floor. That’s right, those stacks you see on the floor? More backpacks. We were in a whole building like this. The floorplan was like a four-story self-storage place, but rather than storage units, there were tiny stores. Every single store was piled from floor to ceiling with some very specific good - this one had backpacks, others had umbrellas, pantyhose, stickers, stationary… one was even filled with tubs of plushies.</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">But what makes this place strange is the foot traffic - or lack thereof. Even at peak hours, the building had more store owners than customers. For units with that much inventory crammed in, they weren’t moving much volume. What gives?</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">My guess is that this was caused by negative real interest rates. Here’s how that works. Normally, store owners pay for their inventory with credit, so the cost of holding inventory comes from the interest rate paid on it. Looking at these little units, crammed with inventory but lacking customers, it seems like they’d have trouble selling enough to make up for the interest cost. But there’s a catch - inflation. With positive inflation, prices go up - including prices of all those goods. If the rate of inflation is greater than interest rates - a situation called “negative real interest” - then gains from rising prices on the inventory outpace the expense of interest. In other words, when real rates are negative, you can make money by taking out a loan, filling a warehouse with inventory, and then just sitting there.</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">During the past decade, negative real rates have been quite common worldwide, especially for short-term borrowing. Given that China goes to extra lengths to devalue its currency, their real rates should be even lower than most countries. I suspect that’s what drives these little “shops” - at the moment, they’re not really shops so much as warehouses with a little side business selling direct to consumers. Most of the inventory will eventually be sold in bulk, hopefully at a profit.</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Trade Theory of Tasty Food</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt; text-align: center;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><img height="400" src="https://lh4.googleusercontent.com/BDt0NfP3ip-86tDGpKfuCT59s8DU_tPpxmYRQjO6lbYSYIB_Y4VEAw0oqer0-GfWhgfjv0A0yPx5PZnKGP-X8edZ4yiMmQJot6F3fRJ5atSkCG4o5GdwXc4KJ5tSLFv7s9-mhtAb" style="border: none; transform: rotate(0rad);" width="297" /></span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">This dish is fried spiced naan bread, with some lamb skewers behind it. The restaurant advertises itself as “silk road” style cuisine, a cross between Chinese, Indian and Persian foods.</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">This gave rise to my trade theory of tasty food: the better access an area had to historic trade routes, the better their ethnic food. Thus the best ethnic food comes from places like India and the Middle East, where trade routes granted access to lots of spices and allowed ideas from many corners of the world to pass through. On the other hand, remote places like Britain or Japan are characterized by bland food with relatively little variety.</span></div>
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<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Chinese Food</span></div>
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<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><img height="400" src="https://lh5.googleusercontent.com/2mLqz9hv_xiP1UEjBwC6_pbKe_Bv-CjAUUAhq7NFOExr263RIrQmuN_NL0v_j_NJjW4UvfnIepzHgQW9EXRXfCimd9C7RUC5mbHquhb9xhzyqC0nR46k_xVroKgz1NeA8O4e9oCX" style="border: none; transform: rotate(0rad);" width="296" /></span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">One pattern in real Chinese dishes is a big pile of vegetables with little pieces of meat hiding in it. Older Chinese people, who grew up in the early communist era, are extremely talented at racing to find the little bits of meat hiding under the vegetables.</span></div>
<br /><span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">Based on the stories, this sort of dish was probably a by-product of the communist famines. I suspect that the “Chinese food” we see in the U.S. today is probably more similar to historic Chinese food than the dishes of modern-day China, since pre-Mao Chinese immigrants never had to adopt their dishes to the constraints of famine the same way people in China did.</span><br />
<span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;"><br /></span>
<span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">Today, though, meat is back with a vengeance. Having grown up with relatively limited meat, older Chinese people today think meat=value when it comes to food.</span>John Wentworthhttp://www.blogger.com/profile/00325384976320984888noreply@blogger.com0tag:blogger.com,1999:blog-3971033849266349559.post-60802102472714172572017-05-02T13:24:00.000-07:002017-05-02T13:24:46.945-07:00College Costs, Part II<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Turns out the <a href="http://seekingquestions.blogspot.com/2017/03/accounting-for-college-costs.html">previous post on college costs</a> omitted some important accounting. This (shorter) post will fill that hole, and then we’ll finally be ready to talk economics. </span><span style="font-family: Arial; font-size: 12pt; white-space: pre-wrap;">This post will start off right where the previous post left off: decreasing student/faculty ratios.</span></div>
<b id="docs-internal-guid-2514e6a5-cacf-9cf1-7668-266e97637e6b" style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Decreasing student/faculty ratios mean at least one of three things:</span></div>
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<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Individual faculty are teaching fewer classes</span></div>
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<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Individual students are taking more classes</span></div>
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<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Classes are smaller</span></div>
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<span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">In principle, any of these scenarios could be identified with the right data. In practice, data on e.g. class size in college is hard to come by, but many answers can be found just from historical course catalogues. Berkeley is particularly helpful; their course catalogues are </span><a href="http://digitalassets.lib.berkeley.edu/generalcatalog/" style="text-decoration-line: none;"><span style="color: #1155cc; font-family: Arial; font-size: 12pt; text-decoration-line: underline; vertical-align: baseline; white-space: pre-wrap;">available online</span></a><span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;"> going back to 1870.</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">If I really wanted my data to be perfect, I’d go through the course catalogues and count the number of classes (or hire someone else to do so). But for now, I’m just looking for a rough estimate, so I’ll use the number of pages in the course catalogue as a stand-in for the number of classes. Berkeley’s catalogue has kept a pretty consistent three-column format since the mid-70’s, so hopefully this estimate won’t be too far off the mark.</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Anyway, looking at the number of pages in Berkeley’s course catalogue by year gives a very satisfying graph:</span></div>
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<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><img height="340" src="https://lh5.googleusercontent.com/SZwoB3k246sVb_suPhai5gVvCfo-HsCzlzBq3d_vY8vOAytSpHpFJqxtLkAKfhwx7VlbyFOMU84qp1mWjp8yaawDb4wZFxQC5ILhXUAJaTvxtKEFiCIWoUMmUCM41TE2X1B_En1z" style="-webkit-transform: rotate(0.00rad); border: none; transform: rotate(0.00rad);" width="605" /></span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">These numbers line up neatly with the numbers from the <a href="http://seekingquestions.blogspot.com/2017/03/accounting-for-college-costs.html">previous post</a>. From 2003-2012, the length of the course catalogue increased by 11.0%; last post mentioned that faculty per student increased by 12% from 2003-2013. Similarly, over this whole period, the length of the course catalogue almost doubled; a chart from the previous post suggests that the number of faculty per student has almost doubled over roughly the same period (at least for law schools).</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The course catalogue also lists all of Berkeley’s professors. Again, I didn’t count them all, but I searched for “Ph.D.” and counted the hits. This is definitely a noisy measure, since “Ph.D.” doesn’t just appear after professors’ names in the catalogue, but it should suffice for a quick-and-dirty check. In the 1980-81 catalogue, there were 2139 hits for “Ph.D.” and the catalogue was 239 pages, a ratio of 8.9. In the 2011-2013 catalogue, there were 4132 hits and the catalogue was 414 pages, a ratio of 10.0. So if anything, there are </span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: italic; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">fewer</span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> professors per class - professors are teaching slightly </span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: italic; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">more</span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> courses on average. But the main takeaway is that the number of courses taught per professor has remained roughly constant even though the number of faculty per student has roughly doubled.</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Going back to our original list of possibilities:</span></div>
<ul style="margin-bottom: 0pt; margin-top: 0pt;">
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Individual faculty are teaching fewer classes -> nope.</span></div>
</li>
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Individual students are taking more classes</span></div>
</li>
<li dir="ltr" style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; list-style-type: disc; text-decoration: none; vertical-align: baseline;"><div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Classes are smaller</span></div>
</li>
</ul>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">I doubt there’s any statistics on how many classes students take, but… sanity check. Are students today taking twice as many courses as students thirty years ago? No way. Maybe there’s been some change, but there’s no way it’s the lion’s share of the effect.</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">That just leaves one possibility: classes are smaller.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Great! So, colleges could cut their costs in half by trading small sections for large lecture halls, right?</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Not really.</span></div>
<b style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">If the number of classes offered at a typical college has roughly doubled - as seems to be the case for Berkeley - then it’s not just twice as many sections of Math 101. After all, we measured the growth in courses offered by looking at number of pages in the course catalogue… and multiple sections of the same course usually go under a single entry in the catalogue.</span></div>
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<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Classes aren’t just half the size; there are twice as many </span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: italic; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">different classes</span><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> now compared to thirty years ago. If the data and assumptions here generalize, then there’s been a </span><a href="https://en.wikipedia.org/wiki/Cambrian_explosion" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">cambrian explosion</span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> in diversity of academic subjects, creating a proliferation of new courses and specialties. Anyone who’s been in academia should be able to confirm that this matches experience. At Harvey Mudd, for instance, this period saw two new departments created (biology and computer science), along with more specialties within the existing departments.</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">This finally gives us a satisfying answer to our original accounting question: where does all the money go? As the <a href="http://seekingquestions.blogspot.com/2017/03/accounting-for-college-costs.html">previous post</a> showed, growth in college cost has practically all gone to more faculty and staff per student. But more qualitatively, the growth in faculty and staff per student has fed a cambrian explosion in academic specialties, as shown by a proliferation of new courses.</span></div>
<br /><span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;">That tells us what all the extra money has been spent on, but we still don’t know </span><span style="font-family: Arial; font-size: 12pt; font-style: italic; vertical-align: baseline; white-space: pre-wrap;">why</span><span style="font-family: Arial; font-size: 12pt; vertical-align: baseline; white-space: pre-wrap;"> so much money has been spent. Why aren’t most colleges offering a narrower selection of courses for half the price? With that question, we’re finally ready to talk economics. That will be the subject of the next post.</span>John Wentworthhttp://www.blogger.com/profile/00325384976320984888noreply@blogger.com0tag:blogger.com,1999:blog-3971033849266349559.post-23108635974384749042017-04-22T12:36:00.002-07:002017-04-22T12:36:12.003-07:00The Immigrant Superbug: A Parable of Science and Policy<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Immigrant Superbug</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Suppose a series of studies are published showing that immigrants are bringing a new superbug into the US. Conservatives warn that, if we don’t seal off the mexican border and block all travellers from developing nations and stop issuing new visas, a deadly epidemic will soon sweep the nation. </span></div>
<b id="docs-internal-guid-3804cea5-9726-e83b-00fa-288a77741594" style="font-weight: normal;"><br /></b>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Oddly enough, most of the supporting research seems to have been published by academics with a conservative bent. I don’t know about you, but I’d be pretty skeptical of the “research” behind this hypothetical crisis.</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Let’s go a step further: maybe liberals are less than impressed with the immigrant superbug research, but they’re willing to get behind an alternative policy solution. Specifically, liberals advocate a new program to provide vaccines free-of-charge to immigrant-heavy communities. An effective vaccine for this particular bug has already been developed, and it’s cheap to produce.</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Of course, the most vocal conservatives deride this so-called “solution”, pointing out that this policy will not reduce immigration at all… indeed, it could well attract even more immigrants!</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">… At which point we conclude that this epidemic business, even if it is real, is mostly just a big show for policies conservatives wanted anyway.</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">A year later, it turns out that the research was correct. Unfortunately, the political deadlock prevents any action until it's too late. Everyone keeps arguing until the epidemic finally does hit, and then everyone dies.</span></div>
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<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">Global Warming</span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Many studies have been published showing that humans’ CO2 emissions are heating up the Earth dangerously. Liberals warn that, if we don’t slap a big tax on pickup trucks and industrial production and use the revenue to subsidize solar panels and wind farms, then deadly changes to the climate will soon sweep the world.</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Oddly enough, most of the supporting research seems to have been published by academics with a liberal bent. Unsurprisingly, conservatives are pretty skeptical of the “research” behind this crisis.</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Let’s go a step further: maybe conservatives are less than impressed with the global warming research, but they’re willing to get behind an alternative policy solution. Specifically, conservatives advocate deregulating nuclear power plant construction. The technology is already marketable, so it can easily replace current power sources without any new taxes or regulations.</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Of course, the most vocal liberals deride this so-called “solution”, pointing out that this policy will not reduce strip-mining or waste at all, and </span><a href="http://www.sierraclub.org/washington/sierra-club-position-carbon-washington-ballot-initiative-732" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">won’t redistribute any income either</span></a><span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">.</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">… at which point we conclude that this global warming business, even if it is real, is mostly just a big show for policies liberals wanted anyway.</span></div>
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<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; color: black; font-family: Arial; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Years later, it turns out that the research was correct. </span><span style="font-family: Arial; font-size: 16px; white-space: pre-wrap;">Unfortunately, the political deadlock prevents any action until it's too late. </span><span style="font-family: Arial; font-size: 12pt; white-space: pre-wrap;">Everyone keeps arguing as both polar ice masses melt, and then everyone dies.</span></div>
John Wentworthhttp://www.blogger.com/profile/00325384976320984888noreply@blogger.com0