Month: November 2018
Those are the topics of my latest Bloomberg column, here is one excerpt:
It turns out that chess is oddly well-suited for a high-tech world. Chess does not make for gripping television, but the option of live viewing online, supplemented by computer analysis or personal commentary, has driven a renaissance of the game.
For one thing, computer evaluations have made watching more intelligible. Even if you barely understand chess, you can quickly get a sense of the state of play with the frequently changing numerical evaluations (“+ 2.00,” for instance, means white has a decisive advantage, whereas “0.00” signals an even position). You also can see, with each move, whether the player will choose what the computer finds best.
In essence, some of the suspenseful stupidities of low-level video games have been infused into eggheady chess. You can indulge your inner Pac Man without feeling guilty about it.
At first it was thought that online viewers would favor rapid and blitz chess, which are (as you might expect) more fast-paced. In fact, the slower games, including contests of five hours or more, have not put viewers off. If you are sitting at your office desk, you might wish to glance at the position every few minutes or so. A slower game means you can do that without missing much of the action, and yet still most of your work will get done. If the game is heading to a climax, you can pay full attention for that short period.
Fortunately, the software programs that evaluate the games and players are not yet infallible. So if Stockfish (one such program) indicates that your favorite player is far behind, you can hold out a slim hope that the software is wrong. “Creating artificial suspense” is one of the killer apps of the internet.
There is much more, including a discussion of basketball and trash talking, do read the whole thing.
1. Swedish “Future Skills” podcast: “Tyler Cowen – Economist and Master Generalist on: Economic Outlook, Social Change, and Future Cities.”
3. Joshua Rothman interviews Knausgaard (New Yorker).
Both reasoning from behavioral-economic first principles, and my personal experience, people are at their most evil out of fear, not greed. Growth means there is less fear going around.
I have a different take on “growth is good for harmony” (52-53). Arrow’s theorem doesn’t become more or less true if a conflict is between, say (+5, +1) vs (+1, +5) or (+2, -2) vs (-2, +2). Rather, the reason why the latter is more disharmonious is loss aversion.
Redistributing money to the rich (p88) is risky because the rich are not necessarily aligned with general population. Caring for old people (p91) is valuable not just for the sake of present individuals, but also as a commitment to future old people who are present-day workers.
From Tim Wu, in a recent NYT Op-Ed, he presents a polemic against “monopoly”:
Postwar observers like Senator Harley M. Kilgore of West Virginia argued that the German economic structure, which was dominated by monopolies and cartels, was essential to Hitler’s consolidation of power. Germany at the time, Mr. Kilgore explained, “built up a great series of industrial monopolies in steel, rubber, coal and other materials. The monopolies soon got control of Germany, brought Hitler to power and forced virtually the whole world into war.”
To suggest that any one cause accounted for the rise of fascism goes too far, for the Great Depression, anti-Semitism, the fear of communism and weak political institutions were also to blame. But as writers like Diarmuid Jeffreys and Daniel Crane have detailed, extreme economic concentration does create conditions ripe for dictatorship.
The first ten words are already a give-away, as is the beginning of the second cited paragraph. For contrast, this is from Thomas Childers, well-known historian of Nazi Germany:
In his biography of Henry Kissinger, historian Niall Ferguson notes that “old man Thyssen” — that is, German steel magnate Fritz Thyssen — “bankrolled Hitler.” Businessmen such as Thyssen using their financial assets to assist the Nazis was “the mechanism by which Hitler was funded to come to power,” according to John Loftus, a former U.S. attorney who prosecuted Nazi war criminals.
But the Nazis were neither “financed” nor “bankrolled” by big corporate donors. During its rise to power, the Nazi Party did receive some money from corporate sources — including Thyssen and, briefly, industrialist Ernst von Borsig — but business leaders mostly remained at arm’s length. After all, Nazi economic policy was slippery: pro-business ideas swathed in socialist language. The party’s program, the Twenty-Five Points, called for the nationalization of corporations and trusts, revenue sharing, and the end of “interest slavery.”
And Wu’s two other cited sources? Both focus mainly on IG Farben. Diarmuid Jeffreys is “an award-winning journalist and television producer with thirty years’ experience in the media industry.” He does have a book on IG Farben and the making of the German war machine, but it does not demonstrate how economic concentration brings totalitarian regimes to power, instead focusing on how IG Farben profited from Nazi war aims and helped build the Holocaust. Earlier in the 1930s, IG Farben had in fact resisted Nazification. though the company did jump on board once it saw Nazification as inevitable.
Here is the Daniel Crane essay on antitrust and democracy. Try this excerpt: “… it does not necessarily follow that Farben’s monopolistic position in the German chemical industry is causally related to the rise of fascism—or that monopoly enabled Nazism. Two matters should give us pause before making such an inference.” Read p.14 to see what follows, but here is one tiny bit: “Though gigantic, Farben remained smaller than three American industrial concerns—General Motors, U.S. Steel, and Standard Oil. Nor was Farben’s wartime market power exceptional.” On the other side of the ledger, Crane does note that fascistic governments, once in power, find it easier to take over and co-opt more highly concentrated industries, Farben being an example of that. So there is an argument here, but mainly one data point and also some very serious qualifiers.
Does that all justify the sentence “But as writers like Diarmuid Jeffreys and Daniel Crane have detailed, extreme economic concentration does create conditions ripe for dictatorship.”? “Ripe” is such a tricky, non-causal word.
I would instead stress that war, civil war, scapegoating, and deflation create the conditions “ripe for dictatorship.” You might want to toss Russia and China into the regression equation, or how about Cuba and North Korea and Albania and Pol Pot’s Cambodia? How would the coefficient on industrial concentration end up looking? I’d like to know.
When big business is the target, and tech in particular, the standards of proof for Op-Eds seem to decline. Somehow, because we all know that the big tech companies are bad, or jeopardizing democracy, it is OK to make weakly argued claims.
In November 1931 Churchill also published an article entitled ‘Fifty Years Hence’ in Maclean’s Magazine, in which he made some absurd predictions — that we would grow only those parts of chickens we wanted to eat, for example — but also some astonishingly accurate ones. ‘Wireless telephones and television…
3. With @RyanHawk12 on The Learning Leader Show – Talked about developing skills for what is scarce, Stubborn Attachments, & having a complete dedication to your craft http://bit.ly/tylercowenryanhawk.
4. The Future Library — books that will not be published until their authors die (NYT).
5. New journal allows academics to publish controversial articles under a pseudonym (while they are still alive).
What do #1, #4, and #5 on this list have in common? Three such items in one day? Is it possible that Leo Strauss is underrated?
Let’s start with some possible institutional failures in mainstream philanthropy. Many foundations have large staffs, and so a proposal must go through several layers of approval before it can receive support or even reach the desk of the final decision-maker. Too many vetoes are possible, which means relatively conservative, consensus-oriented proposals emerge at the end of the process. Furthermore, each layer of approval is enmeshed in an agency game, further cementing the conservatism. It is not usually career-enhancing to advance a risky or controversial proposal to one’s superiors.
There is yet another bias: the high fixed costs of processing any request discriminate against very small proposals, which either are not worthwhile to approve or they are never submitted in the first place.
Finally, foundations often become captured by their staffs. The leaders become fond of their staffs, try to keep them in the jobs, regard the staff members as a big part of their audience, and adopt the perspectives of their staffs, more so as time passes. That encourages conservatism all the more, because the foundation leaders do not want their staffs to go away, and so they act to preserve financial and reputational capital.
To restate those biases:
- Too much conservatism
- Too few very small grants
- Too much influence for staff
So how might those biases be remedied?
Why not experiment with only a single layer of no?
Have a single individual say yes or no on each proposal — final word, voila! Of course that individual can use referees and conferees as he or she sees fit.
The single judge could be an expert in some of the relevant subject areas of the proposals (that is sometimes the case in foundations, but even then the expertise of the foundation evaluators can decay).
This arrangement also can promise donors 100% transmission of their money to recipients, or close to that. If someone gives $1 million to the fund, the award winners receive the full $1 million. This is rare in non-profits. (In the case of Emergent Ventures there are unbudgeted time costs for me and my assistant, who prints out the proposals, and the paper costs of the printing get charged to general operating expenses at Mercatus. Still, a $1 million grant at the margin leads to $1 million in actual awards. I am not paid to do this.)
The solo evaluator — if he or she has the right skills of temperament and judgment — can take risks with the proposals, unencumbered by the need to cover fixed costs and keep “the foundation” up and running. Think of it as a “pop-up foundation,” akin to a pop-up restaurant, and you know who is the chef in the kitchen. It is analogous to a Singaporean food stall, namely with low fixed costs, small staff, and the chef’s ability to impose his or her own vision on the food.
Once a fixed sum of money is given away, and the mission of the project (beneficial social change) has been furthered, “the foundation” goes away. No one is laid off. Rather than crying over a vanquished institutional empire and laid off friends/co-workers, the solo evaluator in fact has a chance to get back to personally profitable work. It was “lean and mean” all along, except it wasn’t mean.
The risk-taking in grant decisions is consistent with the incentives of the evaluator, consistent with the level of staffing (zero), and consistent with the means of the evaluator. A solo evaluator, no matter how talented, does not have the resources to make and tie down multiple demands for complex deliverables. Rather, a solo evaluator is likely to think (or not) — “hmm…there is some potential in this one.” The wise solo evaluator is likely to look for projects that have real upside through realizing the autonomous visions of their self-starting creators, rather than projects that appear bureaucratically perfect.
And how about the incentives of the solo evaluator? Well, a fixed amount of time is being given up, so what is the point in making safe, consensus selections with the awards? The solo evaluator, in addition to pursuing the mission of the fund, will tend to seek out grants that will boost his or her reputation as a finder of talent. You might worry that an evaluator, even if fully honest will self-deceive somewhat, and use some of these grants to promote his or her own interests. I would say donate your money to an evaluator who you are happy to see rise in status.
In other words, the basic vision of Emergent Ventures, the incentives, and its means are all pretty consistent.
The solo evaluator also has the power to make very small grants, simply by issuing a decision in their favor at very low fixed cost. Alchian and Allen theorem! That helps remedy the bias against small grants in the broader foundation world.
The single evaluator of course is going to make some mistakes, but so do foundations. And the costs of these evaluator mistakes have to be weighed against the other upsides of this method.
In my view, at least two percent of philanthropy should be run this way, and right now in the foundation world it is about zero percent. So I am trying to change this at the margin.
How does this idea scale? What if it worked really well? How would we do more of it?
Well, it is not practical for this solo evaluator to handle a larger and larger portfolio of grant requests. Even if he or she were so inclined, that would bring us back to the problems of institutionalized foundations. The ideal scaling is that other, competing “chefs” set up their own pop-up foundations. Imagine a philanthropic world where, next year, you could give a million dollars to the Steven Pinker pop-up, to the Jhumpa Lahiri pop-up, to the Jordan Peterson intellectual venture fund, and so on. Three years later, you would have an entirely different choice, say intellectual venture funds from Ezra Klein, David Brooks, and Skip Gates, among others. The evaluators either could donate some of their time, as I am doing, or charge a fee for performing this service. You also could imagine a major foundation carving off a separate section of their activities, and running this experiment on their own, with an evaluator of their choosing.
In a subsequent post, I will discuss how this model relates to the classical age of patronage running through the Renaissance, into the 18th century, and often into the 20th century as well, often through the medium of individual giving. I also will consider how this relates to classic venture capital and the relevant economics behind “deal flow.”
In the meantime, I am repeating the list of the first cohort of Emergent Ventures winners. That link also directs you to relevant background if Emergent Ventures is new to you.
1. Jordan Orlando on The White Album (which song is the most popular/enduring on that album? It is difficult to say, but it is now fifty years old).
4. How placebos work there is no placebo (NYT).
5. Scott Alexander is now more positive on preschool. And Scott Alexander on marijuana: “If the above calculations are true, preventing national legalization of marijuana would save half as many lives as successfully implementing Australia-style gun control in the US.” [Please note Scott is not suggesting a particular conclusion on either of these policy issues.]
Last week I titled a post, Blockchains in Space!, as a satirical comment on blockchain mania. Obviously, I forgot the new rule that satire is no longer possible.
SpaceChain’s blockchain node has been launched into space on Oct 25, 2018. In the map below, you can track its movements to see exactly where it is in orbit.
The SpaceChain FAQ also provides a good example of a kind of doublethink that is very common in the blockchain world:
What is the difference between having a blockchain on Earth as opposed to in space?
Blockchain technology is hosted on centralized servers on Earth and are vulnerable to hacking. One way to prevent this issue is to get these platforms on a decentralized network such as SpaceChain’s blockchain-based network of satellites. Blockchain technology in space will be safer from other vulnerabilities such as internet kill switches or governments that are against the technology. In addition, blockchain technology in space will prove as a great use case for supply chains especially since there are certain places on Earth that are outside of coverage zones such as oceans, deserts and forests. These satellites will be able to track, monitor and scan these dead zones.
How do you ensure legal compliance with regulatory bodies in various countries?
We have a legal team to ensure full compliance. We also have team members and partners in China, Israel, Singapore and the US who work with local governing bodies to ensure that we are fully compliant with local regulations.
Ironically, I’m bullish on blockchain (I advise several firms in the space) but it would be nice to see real products with real customers before we start putting blockchains in space.
Japanese hotels and banks are, by global standards, heavily overstaffed despite the country’s demographic crunch. Most supermarkets have not embraced the automated checkouts common elsewhere, nor airlines self-service check-ins. The offices of Japan’s small and medium-sized enterprises are among the most inefficient in the developed world, chides McKinsey, a management consultancy.
Japan has an elaborate service culture, which machines struggle to replicate. Japanese customers, especially the elderly, strongly prefer people to machines, says Yoko Takeda of Mitsubishi Research Institute, a think-tank. Employment practices make it difficult to replace workers. And while gimmicky robots abound, Japan struggles to develop the software and artificial intelligence needed to enable them to perform useful tasks, says a report by the Ministry of Economy, Trade and Industry (METI), the cockpit of Japan’s post-war miracle. So while the reception at the robot hotel is automated, seven human employees lurk out of sight to watch over customers and avoid glitches. Robots still cannot make beds, cook breakfast or deal with a drunken guest who will not pay his bill.
Here is more from The Economist.
1. Richard A. Arenberg, Congressional Procedure: A Practical Guide to the Legislative Process in the U.S. Congress. You know, this stuff matters a lot more than it used to.
2. Timothy Larsen, John Stuart Mill: A Secular Life. Covers the evolution of religion in Mill’s life, and stresses that toward the very life he turned back to a religiously-oriented world view. Arguably all of the (< 12) people at Mill’s funeral were Christians. As a side benefit, the book has an illuminating treatment of the romance with Harriet Taylor. I’ve since ordered four other of Larsen’s books, the ultimate compliment.
3. Daniel Walker Howe, The Political Culture of the American Whigs. An excellent history book in its own right, this is also one of the best sources for understanding the 19th century roots of our current dilemma. Reading everything by Daniel Walker Howe is in fact a good algorithm for proceeding in life.
Daniel S. Hamermesh, Spending Time: The Most Valuable Resource is a good introduction to what economists know about the allocation of time, both evidence and theory.
Adam Zamoyski, Napoleon: A Life I read only some parts of, and found very well-written and entertaining, but it wasn’t sufficiently conceptually innovative to hold my interest.
Jacy Reese has a new book The End of Animal Farming: How Scientists, Entrepreneurs, and Activists are Building an Animal-Free Food System. It is overstated, but still better than the near-unanimous ignoring of these issues which goes on in the economics profession.
Soon I will be doing a Conversation with recent Nobel Laureate Paul Romer, no associated public event. What should I ask him?
I thank you all in advance for your wise counsel.
2. Do large companies boost entrepreneurial entry? Evidence from the Amazon HQ2 search.
4. “Results indicated that choosing the vocational compared with the academic pathway was associated with higher conscientiousness and less interest in investigative, social, and enterprising activities.”
From before the season started:
COWEN: The Milwaukee Bucks last year won, I believe, 44 games, and in the NBA, they were in the bottom third for the number of three-pointers attempted. Why should we think they might do better this year?
[Ben] THOMPSON: Because they had the worst coach in the league, by far, and he is gone, and now they have a new coach. They actually have the best shot profile in the entire league in the preseason, which is shooting threes or shooting shots at the rim. They are 89 percent or something like that.
They are going to have a great year. Giannis is going to win MVP. It’s going to be amazing, and we, being Bucks Twitter, is going to spend the whole time telling everyone that we were right and they were wrong.
That is from my Conversation with Ben Thompson. The Bucks are now 9-2, and two nights ago they beat the world champion Golden State Warriors.