Sunday, December 27, 2009

Too Big Not to Fail

We all know about "economy of scale," with Wal-Mart as the canonical example.  What about diseconomies of scale

The linked article counts off a number of factors that might contribute to decreased efficiency as companies get larger.  To that list I would add:

  • Beyond hierarchy and its associated communications challenges, size also brings scaling problems.  Organizations have a natural limit on growth rate beyond which the existing employees will be overwhelmed in their attempt to instill the existing culture into the new recruits.  Many large companies grow faster than this rate and "lose their way."
  • Small companies have little to lose and much to gain.  For large companies, this situation is reversed.  As a result, larger companies will adopt more conservative approaches, counting on network effects and bullying in order to maintain their position rather than taking big chances or moving in new directions.  Microsoft is an obvious example here, but so is GM.
  • In some industries, a strong temptation might appear to move from a strategy of providing value to one of rent-seeking.  Interaction with the government becomes important here, as size can have enormous advantages when it comes to lobbying, regulatory capture, no-bid contracts, bailout money and the like.  Defense contractors are terribly inefficient at producing the goods and services that they nominally sell, but probably much more efficient when dealing in the market where they actually compete with one another: the pursuit of influence in Congress and the military.
The answer is probably that more and more medium-sized companies are better.  The mom and pop shop is inefficient, but so is the sclerotic GM.  How to get there?

Saturday, December 26, 2009

Doesn't matter what I'm packin' in my denim it's what's in my genes

So a dude got a reduced sentence after it turned out that he has an aggression gene.

First, I wonder what that has to say about recidivism?

Second, we're eroding the conceptual bedrock of free will rather rapidly, no?

Friday, December 25, 2009

Tuesday, December 22, 2009


Here's a list of the tags that I've applied to posts so far.  Good times...


Tuesday, December 15, 2009

If only we had the time

Economics is about the allocation of resources. At one point in time, physical resources were a big deal. In some cases they still are, but the scantest resource in this day and age is the time and effort of organized groups of intelligent and well-trained people.

The government endeavors to direct this effort into positive social directions like keeping the environment clean, ensuring the safety of things like cars, drugs and planes, blowing up foreigners, keeping the SuperBowl nipple-free and the like.  Despite these efforts, a majority of the allocation of time, effort and collective focus is allocated by the market - folks doing some combination of what they want to do and what others with money pay them to do.

Folks say that they want healthcare for their fellow man and less CO2 and any number of other things, but when it comes time to pull out the wallet or the calendar, they go to the things they actually want. Fantasy football leagues, porn, Farmville, Twilight, CSI  and the like.

XKCD has it right: bajillions of hours were expended by some of the finest minds of the past few generations in order achieve for humanity the sophisticated technology that we now use for viewing goofy videos on the internet.

So... perhaps it's time to put our time and money where our mouth is: Get out there, earn as much as you can by providing whatever it is that you can do that others value (with dollars, not words), and then donate as much of your earnings as you can afford to the cause that you support...  You might not be rich, but you've got time and brains, and that's just as good as money.

Or count on someone else* to do it and... check out this kickass video of a wheelbarrow race.

*Advanced practitioners will move beyond counting on someone else and take the step of voting for the government to force someone else.  YMMV.

Sunday, December 13, 2009

Want you smothered, want you covered...

One of few things that the South has over California.

Friday, December 11, 2009

Tis the season

I can tell from the lights, the music, the ads on the TV...

This is the season when all the Christian conservatives who voted Bush in twice and voted for all those gay marriage prohibitions pray for Peace on Earth and Good Will Toward Men.

Onward, Christian soldiers!

Wednesday, December 9, 2009

Capitas and Caps in Asses

Here's a crazy stat: the US of A spends almost exactly twice as much, per capita, on healthcare as Sweden.

Here's a crazier stat: our per capita spending on the military is thirty times as high.

So, while we should definitely figure out how the Swede's are staying healthy for 2000 a person instead of 4000, it seems far more pressing for us to figure out how they're staying defended for 160 bucks a head instead of 4700.  An order of magnitude more pressing, even.

Thursday, December 3, 2009

Answers that need questioning

The topic is health care.

Public option proponents need to explain why auto insurance works so well despite being privately provisioned (although there are coverage mandates in most states).  Or, I suppose, convince me that auto insurance does NOT work so well.

Public option opponents need to explain why so many other countries have gone that route with apparent success (Canada, most of the EU, etc).

These aren't new or original questions, they've been answered all over the place, by all kinds of people.  Somebody link me up with some convincing arguments.

A few starting thoughts:
  1. You know that Geico commercial with the money and the 80's song?  Or the one with the gecko?  Or the cave people?  What about the health insurer campaigns.  I can't think of one.  Is that because they market to HR reps and not to me?
Private insurers don't generally pay for regularly scheduled service or even unscheduled service that did not have clear cause, like a car accident.  And they total cars if things get out of hand.  And there's nothing in their industry that approximates the costs associated with, say pre-natal care.
  1. I haven't run the numbers, but it seems pretty true across the board that countries with public health care have all, or nearly all averaged significantly lower year-on-year GDP gains over the past few decades.  Might this be the hidden cost?
  2. Is there any credibility to the claim that public plan countries "free load" off the innovations of the US private sector, by providing implementations of technologies developed and later economized by the US?  If so, is the opportunity cost for switching higher in the US than it was in other countries?  Any way we might free load off of, e.g., India?  China?  Too soon for that?

Friday, November 27, 2009

The Gervais Principle

We're not above dabbling in pop-sociology here at I'm Just Sayin' headquarters.  With that in mind, I offer business theory, according to The Office.

There are a bunch of convenient fictions that help us make sense of our world, or at least minimize the extent to which our world freaks us out.  We like to pretend that nations are things, that reality shows deal in reality, that drugs are the sort of thing upon which war might be declared, and so on.  Among these convenient untruths is the idea that we live in something called a meritocracy.

This meritocracy theory should fall flat on its face.  Do you really believe that you were the best person available who might have filled your slot in your company/university/bedroom/whatever?  Do you really believe the same of your cow-orkers, classmates, bosses, teachers, partners/whatevers?

Most of us resolve this discord by assuming incompetence.  Sure, SATs are a bad proxy for scholarship, and CVs are a bad proxy for competence at a job.  Judging folks based on their physical stature or dress or behavior in highly contrived situations is no good.  But we haven't got anything better.  Or maybe a select few "get it," and will revolutionize the world.

In the corporate world though, what evidence is there of firms "getting it?"  There are some internet-famous companies like 37 Signals and Joel On Software's firm that understand the evils of CVs and cubicles and retarded interview questions, but Microsoft very famously doesn't.  You KNOW IBM doesn't.  Any of the non-tech companies will fare even worse.

Why haven't the companies that "get" the flaws in our meritocratic implementation used that information as competitive advantage and won out over the others?  Perhaps the failed implementation is a feature, not a bug.  Perhaps we don't live in a meritocracy, or, more accurately, the definition of "merit" is otherwise than what we had thought.

What does our system do a GOOD job of screening for?  Folks with good social connections.  Folks who are willing and able to follow arbitrary, stupid, or even self-contradicting rules in order to get ahead.  Folks who understand and follow the mechanisms of in-group/out-group identification.  Folks who are ambitious enough to wade through a bunch of meaningless crap in order to get what they want.

Corporations have economies of scale as worker count goes from thousands to tens of thousands.  Our species on the other hand was designed to function well in small groups of related or otherwise closely knit members.  Perhaps the kinds of folks who succeed in our crazy setup are the kind that are needed to resolve that disconnect.  The "enlightened" companies like 37 Signals are like ants.  They've got a system that works well at their scale, but if they ever grew to the size of a megacorp, they'd collapse under their own weight. To their credit, the 37s folks realize this, recognize the trade-offs involved, and are okay with staying small.

So that's all well and good, but what about the elephant in the room?  The giant exception to the rule of dysfunctional, psychotic megacorp behavior?  (I won't tell you who I'm talking about... just Google it if you can't figure it out for yourself).  Are they just as dysfunctional and psychotic as the rest, but better about disguising it?  Or have they actually figured out how to square the circle?

Thursday, November 26, 2009

They treat objects like men

So the NFL Network is advertising their live and in-depth coverage of the NFL combine.  For those not in the know, the combine is a battery of tests that aspiring football players go through prior to the draft.  The media folks, GMs, scouts and other talent evaluators show up to watch the players in action, ultimately rating each according to his... personality.

Players with really fast personalities or really big personalities or personalities that earned them acclaim in college don't have much to fear.  They'll be making major money, it's just a matter of who's making more than whom.  For  those, on the other hand, whose personalities are a little less exceptional, this is the make or break moment.  The ones that don't make it will be forced to fall back on the college education that they undoubtedly took very seriously.

The lucky ones will gain entry into the NFL, where their career will last an average of 3 years.  More than three in four will fall into the pick-your-poison stat of "bankrupt or under financial stress due to joblessness or divorce."  Then there are the bad knees, the bad health from excessive weight, the concussions, and all the other things that come from spending two decades engaging in high speed collisions with others.

So the industry is hugely popular among men and makes bajillions of dollars, most of which accrue to media magnates, producers, owners and such.  A few workers do make their names and their millions.  Most who make it though don't earn much and are done long before they leave their twenties.  Most who try to make it don't.

Yeah, so this is basically the critique of the pr0n industry that you heard all the sociology and women's studies majors making in the dining halls when you were in college.  Except the pr0n industry is a fair bit further along in fighting STDs than the NFL is on concussions and knee blowouts.

That way

Another data point for the effort to describe our current technological zeitgeist.  Transistors and microphones, auto-tuners and web cams, social media and (probable) piracy, millions of hours of organized effort were deployed by the most sophisticated capitalist economy in world history in order to bring you this. Enjoy.

[Update: another data point can be found here.]

Sunday, November 22, 2009


Try reading this page and see if you can't smell the wax.

More for the "What's in a name?" files

Bear with me here, but a TV ad just inspired me to produce a history of family vehicles in the US since 1950, as told by me, with minimal and probably inaccurate research.  It's probably not worth your time to read it, but I published it anyway in the off chance that you value your time less than I do.

So... back in the day (we're talking WWII here), some bright American car manufacturers looked at the vehicles that were used to ferry luggage and passengers to and from their towns' train stations.  After the war, they started producing these "station wagons" for domestic use.  As anyone who lived through the 50's, 60's or 70's (or seen Wonder Years or That 70's Show) will tell you, the idea was quite popular. 

Station wagons have a bunch of awesome capabilities.  They can ferry large families.  Pets can fit in the back, which is removed from the human area but not as inhumane as, say, a trunk.  There's room for a lot of gear.  Surf boards fit nicely on the roof.   Such practicality lead to widespread adoption by folks who might be conveniently stereotyped as "house wives" or "family men."  The natural result, of course, was that station wagons became irredeemably uncool.

In the 80's, Detroit answered by taking an existing platform, the utility van,  fitting it with windows, adding some domesticated features, and producing... the minivan.  Unlike station wagons, minivans were never cool, but they were definitely popular.  I should know, I was there.  Head over to a soccer park on a Saturday or the Kiss and Ride at a public school on a weekday in the late 80's or 90's and you'd hardly see anything else.  Incremental improvements in the minivan continued for years.  There was a drop-down compartment for sunglasses.  A second door added on the left for more convenient loading.  Child safety locks, standard.  Eventually, automatic electronic doors and tailgates.

As vehicles though, minivans were terrible.  The ride was bumpy, especially in the earlier Dodge caravans.  The steering was loose and wobbly, the brakes unresponsive, the throttle finicky.  The vans were much taller than their station wagon predecessors.  A high center of gravity, when combined with poor handling and suspension, meant for a ride that was as rocky as it was bumpy.  House wives loved the "visibility" that came from sitting high.  Huge blind spots to the rear eliminated some of that advantage.  The fact that the car was simply not maneuverable enough to respond effectively to any newly available information... well that more than eliminated the rest.

There were two strikes against the minivan then.  First, it was uncool.  Second, it was mechanically inferior to normal passenger cars and wagons.  Foreign car companies addressed this second problem.  Honda released a minivan with significantly better handling and reliability.  Subaru released a popular all-wheel drive station wagon.  Volvo released a popular, super-safe, super-reliable station wagon.  Audi, BMW and Mercedes released luxury performance wagons that were hugely popular in Europe.

Needless to say, Detroit demonstrated no capability to make a better mouse trap.  The problem THEY saw wasn't that minivans were terrible vehicles but rather that men with families lacked the self-confidence to drive them.  The solution, we all know, was the SUV.  An SUV is a minivan for a male who's not man enough to admit that he's driving one.  Yes, the men who actually use their SUVs to tow things are excused from this judgment, but you and I both know that such cases amount to little more than rounding error among the overall sales.

SUVs continued in the tradition of domesticated features.  DVD players for the kids, automatic everything (even automatically collapsing seats), oodles of connections for cell phone chargers, you name it.  They also continued in the tradition of terrible driving performance.  The Dodge Caravan might have been a terrible platform, but at least it was based on a car (the old Chrysler "K" arrangement, from the LeBaron and others).  SUVs were built cheaply on a truck chassis.  They rode higher off the ground and were much heavier.  They used truck engines which were geared for towing instead of acceleration or economy and got terrible gas mileage.  Credit where it's due: a Dodge Caravan circa 1990 set the bar so incredibly low that the even worse performance of a Ford Explorer circa 2000 is a feat worthy of mention.

So SUVs were terrible, but terribly popular.  Foreign auto makers made great cars, but no one was buying them.  The solution, once again, was to disguise their quality product in order to fool the American market.  Toyota spiffed up the interior of the Aussie Outback-conquering Hilux, called it a 4Runner, and sold a bajillion of them.  Then they put an SUV body on a car frame, called it a RAV-4, and sold a bajillion of those.  Honda followed suit with the CRV.  VW created an incredibly awesome new platform.  The thing looked like an SUV, handled like a sports car, won the Darpa challenge, and you could buy it with a sophisticated diesel engine or as a hybrid.  Then they inexplicably called it the Touareg, as far as I can tell, no one bought one.  Then Porsche (who had co-developed the platform) put a 500HP engine in it, called it a Cayenne, and some rich people bought them.

The lesson of the Japanese car-based SUV lines though was that Americans were actually willing to purchase a decent vehicle as long as the styling was aggressive enough and the television ads featured a lot of flying rubble and mud.  Slowly and tentatively, companies started to respond.  Lexus released an SUV that was based on a Camery.  Acura released the sporty RDX, which gets 28 mpg.  These "crossovers" were all based on car or car-like platforms but dressed up to look like the light trucks with which Americans were infatuated.

As the crossovers continued to succeed, the foreign auto makers became bolder.  Honda designed a hatchback called the Fit, Mazda released a hatchback "3" (a rebranding of the old 323 models) and Toyota made some stuff that was so wacky that they had to call them Scions.  Then they made the Venza.

Which of course brings us back to the beginning.  Take a look at a Venza or a Fit sometime (or even a newer Chevy Malibu).  You'll never see the words in any marketing copy or hear them in a television ad, and there's a lot of plastic molding trying to fool you, but if you step back and take a good look, you'll realize what I've realized.  These are station wagons.  They've swapped the woody panels and the rear-facing seats for SAT-NAV and a 320HP engine with dual exhaust (Chrysler even released some monstrosity with a "Hemi" and battlement style slit windows that they called the Magnum), but they're still station wagons.  It's been a few decades in the wilderness, but we've "crossed over" to the place we never should have left.  I just saw testosterone-drenched ad, during a football game, for a station wagon.  Who'd have thunk that all we needed was a new term and some plastic body kit?

Socialist Engineering

Yes, Dilbert-creator Scott Adams has a blog.  It is as generally inane as you would think that it would be, but I do recommend it nonetheless (or as a result?).

Anyway, here are his thoughts on Chinese leadership.  The engineers that I know personally, and there are many, are generally not in favor of, e.g., censorship.  The overall idea is worth consideration though, I suppose.

Saturday, November 14, 2009


Saw this and had to blog it, natch.  Hope it helps you as much as it hasn't helped me.

Saturday, November 7, 2009

Some inequalities are more equal than others

So income inequality trends might not be as bad as we thought.  Or maybe this preliminary finding is wrong and they are as bad as we thought.  Who knows, and who cares?

No one but economists know or care about a Gini Coefficient.  The only measure of income inequality that matters to anyone else is perception, not some precisely measured abstract measurement of reality.  Do the poor FEEL rich, and do they FEEL like the super-rich are TOO rich?  These are subjective and amorphous concerns.  They're the reason why we get all worked up over the fraction of a percentage point of the AIG bailouts that went to executive bonuses instead of the bailouts themselves.

Pretty much the biggest financial risk for poor folks is health care spending.  If we can improve that facet of economic life, then the poor should feel a lot richer... no matter what the actual inequality numbers are.

On Executive Pay

We know it's to blame, we just can't seem to prove it...

Thing is, we're really good at the HOW... executives in good old boy networks compensated the crap out of each other irrespective of the performance of their various corporations.  The result was an economic crisis which penalized the common man through tax dollars going to bailouts and unemployment and pension fund losses and such.

It's the WHY that we don't know.   If executives knew this was coming, why did they lose so many billions of their own money?  Didn't they realize what the common man doesn't, namely that the tax dollars funding bailouts come, by and large, from the executive class, not the common class?

All told, it doesn't seem like the crisis was a good thing for executives.  What does that mean?  Did they know it was coming and mis-judge the implications?  Did they not care?  Or, and this seems too intuitive to be true, but hear me out, did they not know it was coming?

If they didn't know it was coming, then how would changing incentives help?

I'm of course the first one to argue in favor of institutions and incentives guiding behavior, but what behavior and what incentives here?  Sure we'll come up with some sort of regulations now in order to fight the last war, but we're still going to be critically under-regulated in whatever leads to the NEXT one, right?  Anybody see a way out of this?

Sunday, October 25, 2009

Appeal to authority

Yeah, Tyler Cowen has some street cred in the area of economics (and books and ethnic dining and many other areas too...).  On the matter of having a man in Washington, it appears that he and I are in agreement.

Saturday, October 17, 2009

What's in a name?

So most of us here, we're Dualists, in this sense.* We like to think of the universe as something that contains things. We name the things we see, and we build concepts around the names we create. I have a car, see the ocean from my window, etc. There are two levels of error (see what I did there?!?) with this way of operating:

  1. There really isn't a car or an ocean. These are just terms that we're applying to assorted groupings of atoms, which are random assorted groups of other things, and so on. If, over the course of many years, I replaced every part of my car at some point, would it still be the same car? What if i replaced all the parts at once?
  2. Even if we accept that there are in fact things out there in reality that are distinct and ought to be named, we can also make the error of mis-naming them. Pluto was once thought to be a planet, for instance. There are clearly defined rules for classifying the thing we call Pluto as a thing we might call a planet, and, as best we can tell, Pluto fails to satisfy the rules. This came up recently under the discussion of what, exactly, a job is.
The names that we give things affect the manner in which we think about them. The name and thing that I want to spill ink over today is the modern nation state (in the Westphalia sense). I am, for example, a citizen of the United States of America. As a result, I possess some theoretical sort of American-ness. There are a complicated set of rules about who has it and who doesn't. The big one is location of birth, but there are a bunch of other ones.

American-ness isn't really correlated with any other common way of describing people. Most Americans speak English. 3/4ths are white. About that many are Christians, but they split between Catholic and a bunch of different Protestant sorts. Beyond that, most demographic measures fail to hit even 50%. One couldn't say that American-ness means city-dwelling or suburban-dwelling or rural-dwelling, since there are Americans that do all of that. American-ness doesn't suggest a particular ethnicity or profession or age or income or gender or political leaning or level of education or hobby or interest.

American-ness isn't a really good proxy for anything. Even the things that describe the majority of Americans (white, Christian, English-speaking) apply to large non-American populations too.

Still, American-ness is very important.

There's government that takes my money and provides me with services just because of my American-ness. There's a military that's protecting my ass and blowing shit up in my name just because of my American-ness. There's a tall, handsome fellow who claims to be my President just because of my American-ness, even though we've never met and I didn't vote for him. There are a bunch of folks who make rules that apply to Americans, and another bunch of folks who enforce those rules, but only among Americans.

The US Congress represents my American-ness but little else. There are 535 voting members, I got the chance to vote for 3 of them, and I actually voted for none of them. Most of them share my gender, race and language, but none share my profession or religion. I'm not related to any of them. They're all older than me and they all make more money than me.

Still, they got to decide that folks with my combination of Young-ness, American-ness and Male-ness ought to be required to throw their name in the hat for conscription. They decided that it's okay for me to get drunk but not okay for me to get high, presumably because the latter is in some way incongruent with my American-ness. They decided that when I reach a certain age I can receive Social Security, and they decided that at any age, I'm obligated to pay money in taxes.

Really, these legislators and their enforcers, they care a lot about me. The care about what education I receive as a kid, they care about the age at which I retire, they care about the kinds of cars that I can sell to other folks with American-ness, the kinds of foods that I can sell, the kinds of things that I say about the foods that I can sell, the kind of drugs that I can use, the kinds of places that I can go, the kinds of things that I can wear onto a plane, all sorts of things. All of this because of my American-ness. A clone of me without my American-ness wouldn't get the benefits, wouldn't pay the taxes and wouldn't be subject to the rules.

If my doppelganger were Dutch, that reason alone would qualify him for independence in making the drunk vs high decision. If he were German, he'd qualify for making the decision about how fast to drive. If he were English, he, unlike me, wouldn't qualify for the decision about whether or not to purchase a handgun.

Nothing about being born on American soil is guaranteed to prepare me for choices involving handguns and guaranteed to render me incapable of making choices involving drug consumption and driving speed. American-ness is arbitrary. Fake. Made up. It doesn't mean anything other than American-ness.

The fundamental problem with all of this (1 above) is that NO -ness of any sort is really important. Not American-ness, not Jew-ness, not Black-ness, not Christian-ness, not Software Developer-ness. They're all imaginary divisions.

Beyond that (2 above), even among the unimportant -nesses, this American-ness isn't really important. It's not particularly important to me. When I think of the -nesses that define me, I think of my hobbies, of my profession, of my interests, my education, my friends, my relatives, my views. American-ness exists independently of that. If I meet someone who went to the same school that I did, or who came from me home town, or who I'm directly related to, or married to, or friends with, or who writes the same kind of software that I do, I feel a certain connection. American-ness doesn't provide that connection.

Yeah, but who cares?

Well, when those legislators that don't represent anything but my American-ness talk about "poor" people, they almost always mean "poor for an American." Poor-ness is a very important thing to discuss in the halls of power, but it's almost never considered independently from this American-ness. This is of course silly, since being poor is a -ness that actually means something, whereas American-ness is a -ness that has no meaning.

Imagine how policy debates would seem if you took the implicit American-ness filter out of it all. Which of these makes sense?

1) Tax folks in the top 1% and use the money to buy healthcare for the bottom 20%.
2) Tax folks in the top 0.001% and use the money to buy healthcare for the folks whose income is in the top 11-13%

Well, 2 seems silly. I mean, what's so special about being in the top 11-13% that makes them so much needier than the folks in the bottom 87%? Well, American-ness. You can be in bottom fifth of those with American-ness while still being in the top fifth of those with human-ness. To folks living in the REAL bottom 20%, our little discussion must seem as silly as Americans talking about whether or not Bill Gates should really be helping Steve Jobs with his medical bills.

This nation-ness goes beyond health care though. We're at war with this thing that they call Afghanistan because of these folks that they call the Taliban, who had a guy called bin Laden, who thought he was at war with this thing called the United States because of the actions of a few of those non-very representative Presidents and legislators that I was talking about. I read someone on the internets, who had this to say about that (bolding mine):
"The Taliban were and remain nasty characters. They treat objects like women and look at what they did to those lovely Buddhas. On the other hand, although they had achieved temporary superiority in the ongoing internecine conflicts that have roiled in Afghanistan ever since the first foreigner imagined that Afghanistan was a single country, they were never exactly the sole legitimate rulers of the Afghan nation."
Well, yeah, good point. Why are all the bickering factions of Yugoslavia and India and Korea and Ireland separate nations now whereas the bickering factions of Afghanistan and Iraq and Spain aren't? There's really no easy answer to that. Nation-ness is a pretty damned arbitrary thing.

It's an arbitrary thing, but in many cases, it's the minimum addressable unit. Congress can't declare war on OBL or the Taliban. OBL can't declare war on Bush I, or even everyone who voted for him. The Kurds can't set up an embassy in DC. There are no congresscritters debating Obama's healthcare package who were voted in by villagers in Africa or Southeast Asia and who are literally dying for fresh water or mosquito nets or antibiotics.

This isn't the fault of the Democrats or the military or anything like that, any more than the unemployment fracas from earlier was the fault of the individual bureaucrats who were involved. These folks are victims of their institutions. They only have freedom to act within a certain framework. This is a job, this is a nation, these are the rules that apply to jobs and these are the rules that apply to nations.

That said, it's still important to step back every once in a while and realize that the words we use to model reality sometimes do a pretty shitty job of actually, you know... modeling reality.

*(for more reading on this sort of thing, see the discussion in Zen and the Art of Motorcycle Repair Maintenance on what, exactly, a motorcycle is).

Wednesday, October 14, 2009

Easier to ask for forgiveness than permission

There's an American version of this ad somewhere as well, but I like the Irish version better.

Monday, October 12, 2009

A dollar a day

So apparently there's a lawyer out there who's struggling to defend her unemployment benefits after reporting to the state that she earns $1/day from her blog.

The problem here is a matter of the mapping that happens whenever you attempt to create an model a domain. In the beginning, one might start out like so: There are jobs. Some folks have them, others don't. Among those that don't, some are deserving of unemployment and some are not. The deserving ones 1) didn't quit, 2) are looking for employment and 3) have been employed in the past.

That all sounds simple enough, but then you think about it for a while and the exceptions come up. What about folks who are employed but seasonally? Or who work on a contract-for-project basis like actors or writers? Or who were self-employed but then went out of business?

One doesn't become a bureaucrat without being among the best and the brightest of the land, so it goes without saying that those responsible for administering unemployment have run into these issues and worked out the answers. Go to your state's unemployment website some time, you can read all about it. Of course there's a lot of text to go through, but my state, California, has their act together and summarized it all in a quick guide. The guide, which I affectionately refer to by the name they gave it (DE1275A), is 48 pages long. In their defense, some of those are charts or diagrams.

Anyway, I've read through DE1275A, and though I'm not from New York, or a bureaucrat or a lawyer, here's my understanding of the situation. If you're unemployed but earning money, there are a few categories into which you might be put:
  1. You might be earning residual moneys which can be discounted
  2. You might be earning too little money to pass the minimum declarable amount
  3. The money might be enough that your benefits will be reduced somewhat
  4. The money might be enough that you're considered to actually be employed and therefore no longer eligible
  5. The money might not be enough, but you might be considered self-employed, and therefore eligible.
Some of these are easily adjudicated as a simple matter of determining if sum X is greater than limit Y. Others are a bit more tricky and will require an application of a pre-determined standard. Needless to say, the standard was probably not pre-determined with AdSense in mind.

I'm sure that, in the end, the great state of New York will get this little matter sorted. They might even decide that the eventual decision is of sufficient import to merit a bullet point of clarification in their version of DE1275A. And that will be the end of it, until the next time.

What I'm more concerned with though isn't the exact classification of our protagonist's blog revenue, but how the sum of these little decisions has combined to affect incentives. Part of the result of attempting to shoe-horn a program from the industrial era into the information-age/knowledge-worker/whatever-you-call-it era we're in now is that discouraging underemployment might no longer be a good idea.

Writers, designers, actors, programmers, IT workers, teachers, consultants and all their ilk, once laid off, have the option to take on small free lance projects here and there that are great for providing experience and networking potential that might be leveraged toward full employment over time. Those projects might be few and far between and they might not amount to much money.

What unemployment does in that mix is add a bit of an all-or-nothing element to the equation. You've basically got to be sure that the solo work will be reliable enough and profitable enough to make up for unemployment, or you've pretty much got to avoid it altogether in order preserve your shots at unemployment while hoping to find some full-time work before your eligibility runs out.

Surely those who are receiving unemployment checks are happy to receive them, but it's unclear to what extent society is benefiting from its monetary commitment here. What is it, precisely, that makes the unemployed so much more deserving of assistance than our protagonist who was perhaps 0.5% employed? What sorts of behaviors and outcomes are we attempting to discourage or encourage? Are the attempts succeeding?

Sunday, October 11, 2009

Reductio ad absurdam

I give you: JesusPets.

Is there a holodeck program for the Fermi Paradox?

I watched Star Trek a bit in my younger years in the same way that I watched Seinfeld or that show with Urkel in it. That is to say, I was exposed more by chance than by intent, but when it was on, the power of the Tube compelled me.

My main gripes about the show were the fake science and the in-your-face humanism, but somewhere on the list of quibbles came also: the holodeck. Exploring the galaxy on a starship seemed like an expensive and dangerous activity when one could explore it in safety on a holodeck. I wondered why holodeck addiction didn't become the opium den problem of the future.

With that introduction in mind, read this.

Thursday, October 1, 2009

If not the system, than... what?

Apparently, the fact that life expectancies in the US are lower than in other industrialized countries might not be attributable to our health care system.

If that's not the problem, we're going to need something else to blame. McDonald's is a likely scape goat, I suppose. Low density suburban living and the car-based lifestyle it promotes is another possibility. Any other candidates?

Tuesday, September 29, 2009

Another word for 'nothing left to lose'

Freedom worked as Mel Gibson's last breath in Braveheart, and it worked for Janice Joplin (sort of, she apparently died shortly after recording the famous cover of Bobby McGee).

As a political philosophy though, not so much. If Buddhism is the serious pursuit of happiness, libertarianism is the serious pursuit of freedom.

And it's pretty unpopular. What's going on here?

Well, there are two strains of libertarianism that can get mixed up for one another: the ideological and the practical/pragmatic.

The ideological strain is pretty rare. Pretty much no one is actually committed to the idea of liberty for its own sake. Find someone who says they're pro-freedom. Then ask if they support the right to smoke crack on a park bench. Or sell a drug that wasn't approved by the FDA, or a car that wasn't approved by the NHTSA, etc. The folks who are all about sending soldiers to defend "freedom" aren't exactly talking about Freedom with a capital 'F.' I mean, abortions, gay marriage, these aren't part of their picture.

Now, there are some famous ideological libertarians. Patrick Henry, for one. Thomas Jefferson is popular in some circles. These are not people who would be popular today. Someone who argued for the liberty vs death dichotomy probably wouldn't support a citywide ban on trans fats. TJ wouldn't get caught up in the various models for whether or not single payer health care would work. He'd reject the very notion out of hand.

The pragmatics now, they can kind of fit in. These are economists like Tyler Cowen who note the inconvenient truth that free trade results in things like... prosperity. It's the pragmatic view that Yglesias attempts to espouse in his summary. This view focuses on the fact that economic growth is very good. So good that in the medium- to long-run, the absolute gains coming from compounded growth dwarf any concerns about relative inequality at any point in time.

The central thesis to the pragmatic view runs like so: The poorest among us now is better off than the richest a few generations ago. Today we're complaining that some folks can't afford medical treatments that couldn't have been purchased with the crown jewels 20 years ago. These treatments don't exist without economic growth, and economies grow in proportion to the degree of economic freedom in a society.

Now, there are two major quibbles with this thesis. First, some folks reject the primacy of absolute over relative prosperity. There's all this happiness research you see, that seems to suggest that seeing folks who are way richer than you makes it difficult to enjoy the fact that you have access to things that your great grandparents could never have dreamt of .

Second, some folks reject this idea that, at any point in the scale, more economic freedom will result in more economic growth. No one used to take this quibble very seriously. The US was more economically libertarian than Europe, and grew at a faster rate. The Asian tigers were more libertarian than the US and grew at a faster rate. Europe was more libertarian than USSR... and grew at a faster rate. North Korea vs South Korea. You get the picture. Then the Asian currency collapse happened, and the dot com bubble burst, and the US started financing some expensive wars, and the sub-prime derivatives market popped... and this second quibble started looking a bit more valid.

Neither of those two quibbles, mind you, matter in the least to an ideological libertarian. The trouble of course comes in when you've got a libertarian who's in both camps: sympathetic to the ideological claim, but also to the practical benefits. Such a libertarian is very vulnerable to confirmation bias. Since their desire for freedom is axiomatic, they tend to ignore any evidence that their system isn't also optimal from a utilitarian perspective as well. Many Randians fall into this camp, and they're the ones that have, by and large, made libertarianism a dirty word.

Of course they're not alone. Almost everyone who gets picks a political side for ideological reasons falls victim to confirmation bias. Most fall victim very quickly, and very spectacularly. If you don't believe me, pick a position that you absolutely disagree with, find a blog supporting that position, and read the comments. The folks supporting the hated position are morons, aren't they? Hypocritical arguments, logical fallacies, cherry picking. Yuck. Now go to a site that you agree with and look at the comments... carefully...

Anyway, there are two questions here: would you rather be comfy than free? And, can you be comfy without being free?

Bonus question for another day: which do you fear more: concentrated power in the hands of corporations, or concentrated power in the hands of the government? Why, and what's the difference?

Monday, September 28, 2009

Indicators, economic and otherwise

Well, they haven't started their own ninja amazon collective, but the women of our fine land apparently have something to offer as well: the hot waitress index. For the record, I was most recently served by a gray haired, male bartender who ridiculed me (justifiably, I should think) for not drinking enough beer during the Colts-Cardinals game.

Then again, perhaps dive-bar attendance is an economic indicator as well.


Operating under the assumption that this isn't some elaborate ruse, surely there is some social scientist somewhere studying the post-feminist, pre-modernist, para-globalizationist implications of Asgarda, the Ukranian ninja Amazons. It's like Goth meets Xena.

Thursday, September 24, 2009

Unemployment Game Theory

So I'm unemployed and I've been looking at a couple of small contract jobs to earn some money while the hunt for more stable re-employment continues.

This is small-time work, nothing compared to my original salary, or even compared to my current unemployment benefits. In fact, my unemployment benefits will be reduced by 75% of the amount of my side-job earnings. So, if I do $400 worth of work, I end up $100 richer... and then I pay taxes on the $100 I've got left.

So my choice here is 1) spend some time working to earn a small amount money, or 2) spend my time playing video games or hanging out at the beach and end up with almost as much unearned money.

Tuesday, September 22, 2009


It's no secret that I'm kind of a pessimist when it comes to regulation. Not opposed to the idea anywhere and everywhere so much as concerned that most attempts fail, and many are worse than the sickness that they hoped to cure.

This gentleman makes the point that perhaps we're just not trying hard enough.

I'm sympathetic to his sentiment, but I'm still concerned, since we don't tend to abandon failed attempts. The War on Drugs has endured in spite of its miserable failure, as has it's cousin, the experiment where we put an insanely large portion of our population in prisons.

So... what rules do we have on the books now that should be jettisoned, and if so, in place of what?

Friday, September 18, 2009

Isn't it ironic, don't you think?

7/31 - Laid off from job where I developed on a Mac but had to muck about with our Exchange server for email

8/28 - Apple releases Snow Leopard, which adds much better Exchange support to

My is now all dressed up with nowhere to go, but I'm happy anyway since life without Exchange is still a blessing.

Thursday, September 10, 2009

50 minutes of your life

is a large commitment for a video on the internet. But if you watch this, I'd be quite surprised if you later thought those minutes were poorly allocated.

Wednesday, September 9, 2009

Evolution vs Revolution

Us humans, we're great at constructing complex, useful systems... so long as that's not what we're trying to do.

Consider the systems required for you to be reading this post right now: the internet, the web browser, RSS, the laptop on which I wrote the post, the machine on which you're reading it.

Consider the systems powering those systems: http, tcp/ip, dns, high level programming languages like C++ or Java, operating systems, MVC frameworks, XML parsers, hard drives, network cards, lcd monitors, microprocessors.

Consider the systems powering those systems: RFCs, low level programming languages like C and assembler, kernels, I/O theory, U/I theory, transistors, precise machining, sophisticated alloys and chemical production, all sorts of mining, etc.

I'm going to finish writing this in less than half an hour, and you're going to read it in far less time, but we're standing on the shoulders of giants here. Millions of man hours went into the technologies and systems that make this communication possible.

That's quite an effort, considering that no one ever planned all of this. Nobody ever sat down at a desk, put pen to paper, mapped out all of that stuff, and then put a plan into motion that would make it all happen. Many of the individual components were planned out in that manner, but by different people, at different times, responding to different needs.

Consider also our constitution, with over two dozen amendments, the doctrine of judicial review, and the entire corpus of legislation passed since the founding of our nation.

The key to great and useful systems is incremental design and loose coupling. Any time you see a large group attempting a revolutionary plan with a huge design and lots of moving parts, be wary. Whether it's Windows Vista, or the French Revolution, any scheme that bites off more than it can chew is destined for trouble. A small group isn't going to understand all of the interactions, incentives and hidden consequences necessary to pull off a plan of that magnitude.

It's in that light that I respond to things like TARP or the stimulus or current health care reform initiatives. They might work, they might not, but no one can really know what's going to happen. We've got frameworks like Keynesian demand theory, and theories on public choice, but the models all have far fewer moving parts than reality does.

Tuesday, September 8, 2009

A: "It's Complicated"

Q: "How would Facebook describe the relationship between health care and government?"

So... why is HR 3200, "America's Affordable Health Choices Act," 1017 pages long?

Stakeholders. The "HR" means that the bill has to answer to a majority of the house. The Senate will eventually have to reconcile, and the President will eventually have to sign, so it's going to have to answer to them too.

Congresspeople, Senators and Presidents have campaign promises to keep. The Legislators have lobbyists to answer to.

Finally, there are already scads of laws on the books that address the health care system. It's not like the government is out of health care presently. We've got Medicare and Medicaid already, and tax breaks for businesses who provide health care to employees, and probably a few dozen initiatives in that you and I have never heard of.

In the face of this kind of complexity, folks need to fall back upon simpler heuristics in order to make sense of what's going on.

At a basic level, you'll see those who simply believe, a priori, that government intervention is either good or bad. They don't need to know anything more to make up their minds.

At a secondary level, there are those who might note that other nations have attempted similar plans in the past. These folks would want to compare major parts of our bill with systems in Canada or Britain or elsewhere abroad.

Spend enough time studying comparative politics though, and you'll run into a chaos theory mindset. It's very difficult to measure the interactions between institutions, laws, culture, and economy. You just don't know.

One thing that I do know is that 1) laws usually have unintentional consequences, and 2) it's far easier to pass a law than it it is to change one or repeal one.

Of course, NOT doing anything ALSO has unintended consequences.

Anyone who believes that they really know, to a certainty, what will happen when 1017 pages of legal code are or are not released upon a country of 300 million citizens and hundreds of billions of dollars of health care spending is not to be trusted.

So, I guess we'll just have to see what happens.

Monday, September 7, 2009

Wednesday, August 12, 2009

Tony vs Paul

We interrupt our regularly schedule programming for an awesome stop-motion video:

Tuesday, August 11, 2009

Eyes on the panopticon

The economist has a piece on our incarceration rate. Either that or they just published a press release by Senator Webb under their own byline. So... what's the problem here?

Well, there's the failure of the war on drugs, that's an obvious one.

Perhaps less obvious is mental health. I don't know the first thing about the public or private provisions for mental health in the US. It appears to me though that far too many of the mentally ill have fallen through the cracks. If they're in prison, or homeless in the streets, or employed by Fox News... well, that's not doing any good for anyone.

Anyone else have a theory? Does the US of A just have more criminals? Are our cops just better at catching the ones we've got? Do we hand out longer sentences? What's going on here?

Monday, August 10, 2009

Dope on the table

So the US is a world leader in incarceration rates. Drug convictions aren't the only reason, but they're a big reason.

The Portugese, it seems are on to something. Anyone want to convince me why decriminilisation couldn't work in the US too?

Thursday, August 6, 2009

Even More on the Missing Entwives

So, we all know that I'm trying to figure out where all the women are, and why they aren't programmers like me.

This article doesn't touch on the subject directly, but it addresses a lot of the pop-psych that gets tossed around in the conversation. The article is long and detailed and interesting and you should read it. If you don't have the time or the inclination though, a summary:

Women, individually, are more important for survival than men, basically since their part of the reproductive process is the critical path. One man can make 9 babies in 9 months, but that job would take 9 women. This means that women have a higher chance of passing on genes than men, which in turn makes it more important that every woman have decent genes.

Evolutionarily speaking, you want to play it safe with the women since they're likely to reproduce. You can afford to take chances with the men since screwing up on one is okay.  Another can have more children and make up for the loss.

There are a bunch of attributes where men have a higher variance than women.   Height, IQ, math capabilities, whatever.  Similar mean, but at the extremes, there are more men both at the top and at the bottom. So dudes are more likely to have Wikipedia-worthy achievements, but are also more likely to be homeless or in jail.  Men have pretty uniform tastes in women, but women show a lot of variance in their preferences.

Guys are expendable. It's okay to get a few failures in the pursuit of greatness. That model moves well into a social paradigm of negative sum status hierarchies and competition. Status hierarchies have a lot of losers and a few winners. Losers might be dead soldiers,  lowly office drones, football players who never made the big time or whatever,  but in any case they're probably having fewer children than the winners.  Things work out for society though: the winners can have a lot of children.

We need relatively more women to succeed though, so the few winners vs many losers model doesn't work as well. This model moves well into a social paradigm of cooperation instead of competition.

Unfortunately, cooperation works best in small groups and scales linearly. Competition works in large hierarchies and scales geometrically. So you've got one group that's optimized for the things that make social life work: small, interdependent, cooperative groups. Then you've got a second group that's optimized for the things that make social life scale: large, competitive status hierarchies. Hierarchies like politics, corporations, the military, and sports teams.

So, two questions:

1) Is this an accurate model of how things work in the world?

2) If so, what if anything can or should be done about it?

Monday, August 3, 2009

On entitlements

"keep your government hands off my Medicare."

ht: Tyler Cowen @ Marginal Revolution

Sunday, July 26, 2009

Monday, July 13, 2009

Public privates

We usually say that it makes sense for the government to supply these things called public goods. Things that aren't excludable (if they're available to Alice and Bob, Eve can use them too) or rivalrous (if Alice's consumption of the good doesn't prevent Bob and Eve from consuming the same good). Things like clean air, crime-free streets, and national defense.

Private goods on the other hand, don't favor the government naturally. In a Communist country, the government provides them anyway. In a socialist country, the governments supplies... some of them. But which, and why?

Our government supplies post (USPS) and rail (Amtrak) services, both of which are public goods, under the understanding that those goods are natural monopolies.

Okay... so why do we care?

Well, you know what else is a private good? Health care. Is it a natural monopoly? If so, why? If not, why provide it centrally?

Tuesday, May 19, 2009

Don't just stand there, regulate!

Okay, so the novice left-wing attempt at single-factor explanation of our recent crisis might be that de-regulation caused it (the equally wrong novice right-wing attempt would probably blame the CRA or something).

The smarter kids, they'll say we just didn't have the RIGHT regulation. Well, yeah. So... what would that look like? Depends on what you think went wrong...

There are basically two things that had to happen for the melt down to occur:
  1. Investors had to model risk improperly
  2. Those modeling mistakes had to be leveraged, i.e., amplified.
All the focus on (1) is a red herring. Fighting the last war. Arguing about loan fraud enforcement or the CRA is great, but those are the WHAT, not the HOW. The "what" was tulips once, another time it was dot com stocks, another time it was sub-prime mortgages. It's going to be something else next time. I don't see why regulators would be any more likely to see the next bubble coming before the investors. They sure didn't this time around.

Leverage, that second one, that's where the fight should be. There were trillions of leveraged assets involved in the most recent crash. The troubled banks held leveraged obligations measuring huge multiples of their actual assets. Mess up in the millions and the feds probably won't ever notice. Mess up in the trillions and now we're talking about real money.

One way to take prevent excessive leverage is to change accounting rules. Of course it's just such a group of rules that the whole collateralization thing was designed to circumvent. Investors are too clever for their own good, so new regulations will need to avoid actually promoting riskier behavior as investors attempt to engage in creative arbitrage. That might not be impossible, but it will be hard.

Another way to prevent excessive leverage is to take away the money. If your kids keep getting an ice cream headache by scarfing down the chunky-monkey... well, what would you do? Yes, this is the Ron Paul argument (i.e., the Austrian School argument). Banks were taking advantage of low interest rates, borrowing the money that they were investing in this crap. It's never good to have too much money chasing too few solid investments.

Forget ice cream. Easy money is like a flame thrower If you're kids have been operating one of those willy-nilly around the house, do you come up with a complicated set of rules for where they should point it, and when, and at what power, and at what times of day and all that? Or do you just take it away? The Fed and Congress have been falling over themselves to give the kids in the financial sector more propellant than ever before. For the last year or so, the kids have just been hoarding it. For now...

As noted elsewhere, Krugman and his friends worry that if the money isn't easy enough, we'll run into a deflationary liquidity trap. How do we avoid AND avoid blowing another bubble?

Monday, May 18, 2009

Doctoring the Doctrine

It follows that:
  • p (global warming is real, in Bush administration's eyes) < 0.01

Seriously guys, this is a serious problem... or it isn't. Is Waxman-Markey (cap-and-trade carbon permits bill) a serious response?

Bonus question: does it matter if the permits are initially given away or sold, provided that they can be re-sold in either case? EMH + Coase says no, right? Or do one or more fail to apply in super-regulated "markets" like energy?

Monday, May 11, 2009

Helicopter to nowhere

The new bridge to nowhere is apparently a helicopter. Congresscritter from NY funds a new 834 million dollar chopper for Obama. Obama, attempting to convince the innumerate that he's making a good faith effort to respond to looming deficits by shoring up spending, ommits the chopper from his budget proposal. Hilarity, politics, and rent-seeking ensue.

Spending 834 million on a chopper that isn't needed is, of course, what one might call a misallocation of resources. Sure, we'll use the chopper, and sure there were some side benefits like whatever Lockheed learned in building it, but the opportunity cost is the issue here. What else could have been done with that money and that labor? Just paying the 834 million in ransom to Hinchley and his lobbyists would have been a superior alternative. The cost is wasted production from the taxpayers who foot the bill, but why double the folly by wasting the labor of the chopper manufacturers? Maybe that labor could produce something that people actually want. Or maybe the workers would just take the money and retire, spending it on leisure, which is something that they probably prefer to building helicopters.

This is just one more example of kicking the structural employment can down the road. In economic terms, if what you're making isn't something that anybody wants... STOP MAKING IT. MAKE SOMETHING THAT PEOPLE... DO... WANT. You don't get that lost labor back, ever.

Still, lest we get carried away, I've made a little chart to put things in perspective. In the likely event that you can't read the legend, the costs going left to right are: AIG Bonuses (the Financial Services ones that I posted about earlier), the chopper, the overall AIG bailout, the 2008 regular defense spending (not including wartime supplements), the overall cost of the bailout (AIG included), and the overall cost of the Iraq war (aggregate, not annual).

If you look really closely, you'll notice that the AIG bonuses and the helicopter don't seem to have bars. That's not a mistake. Actually, it's the point of the exercise. They're so small that you can't even see them. For more on this, see this video.

Sunday, May 3, 2009

If companies are too big to fail, that means we're in a spot where we're privatizing profit and socializing risk. That kind of spot is a great place to be if you're a stock holder (although, as we've learned recently not THAT great a place), but it's a crappy place to be if you're a taxpayer.

We learend recently that AIG was too big to fail, and AIG wasn't even the biggest corporation around. If it's bad for a company to be that big, what can we do to encourage companies to be smaller?

We also mentioned around here that marginal costs are better for smaller companies, and fixed costs favor larger companies. So, if we want companies to be smaller, we should look to reduce the fixed costs associated with being a company.

What are some of those costs?

Well, compliance with regulation is one. Lobbying the government (a.k.a. "rent seeking") is another.

If we really decide that economies of scale aren't enough to make up for the instability that comes from super-complicated mega-conglomarates, we should do whatever it takes to make compliance and lobbying costs stay high for big corps while reducing or eliminating them for smaller companies.

Low cost of entry is what made Silicon Valley possible. Granted, that industry crashed too, but it was nowhere near this bad.

Now, look around. Does it seem like we're doing all we can to reduce corporate rent-seeking, too-big-to-failness, and fixed compliance costs for smaller firms? If not, why not?

Monday, April 27, 2009

If you could listen to a fractal, what would it sound like?

Programming and music are cousins, I suppose. Two different sub-fields within the greater domain that is applied mathematics. While I'd prefer other means than an FFT when describing my enjoyment of, e.g., a Pink Floyd solo, stuff like this has always intrigued me.

Day of the Triffords from Andrew Sorensen on Vimeo.

Now, this isn't exactly the most user-friendly interface in the world. I'm pretty sure that crown is held by "stick + something that sounds cool when you hit it wit a stick." Even so, hackers in general and LISPers in particular can rejoice in the satisfaction that comes from reading the matrix...

Saturday, April 25, 2009

Is that a stimulus, or are you just happy to see me?

A little over a year ago, I wrote this:
A stimulus package therefore is a suckers game. The market crashed when everyone realized that selling dogfood online wasn't the revolution it was cracked up to be. Bush, Congress and the Fed threw money at the problem, literally. Consumers took the money, avoided the stock market (won't be fooled again) and blew a big real estate bubble (okay, they will be fooled again). What happens when the real estate bubble pops? The powers that are loosen the purse strings...
Now, there's a TON of money that's been ejected into the economy in the last year. TARP was more than half a trillion. The stimulus bill that recently passed was closer to a trillion than half of one. Low interest rates courtesy of the Fed, government-financed troubled-asset buyback plans, and warranty guaranties for GM (okay, that last one isn't really significant relative to the others, but it is pretty wild)?

1.5 trillion? 2 trillion? More? Depends on whose numbers you're using, but any way you slice it, that's a lot of money. Where is it all going to go? Well, some will go straight to inflation. We'll buy the same stuff as before, made by the same people as before, but we'll be paying more since we'll have more money chasing the same goods.

Hopefully though, some of it will go to employing our currently unemployed resources. That's the whole point. Unemployed workers, entrepreneurs with ideas but no funding... these are the things that, when employed and funded, prompt economic growth and recovery.

What, though, will the unemployed workers get jobs doing? What ideas, though, do the entrepreneurs have? In our last bubble, cheap money chased housing, so resources and labor were deployed there. In the bubble before that, cheap money chased internet startups, so the entrepreneurs in that space got literally more funding than they knew what to do with.

Are we to believe that there won't be overshoot this time? Of course not! We'll be fooled again, and the cheap money will chase something that will seem weird this year, revolutionary next year, proven the year after that, and hopelessly retarded the year after that. Retarded like these guys, or like a subdivision of multi-million dollar houses 40 miles outside of Phoenix.

How to spot the next bubble? Hard to say. We can assume that there will be Zeitgeist clues like Time magazine covers, explanatory documentaries on network television, and a whole section of the bookstore dedicated to books on the subject. Another clue: previously rather non-wealthy individuals making a ton of money at some trade that wasn't popular last year, or maybe didn't even exist yet. Another clue: whatever it is, Warren Buffett won't be investing in it.

Will this bubble be as bad as the last one? Well, there's WAY more money looking for a place to go, so that doesn't look good. On the other hand, firms might have learned their lesson on leveraging (and if they haven't, the government might try to impose that lesson anyhow), so maybe there won't be a huge multiplier from derivative investments like there was this time.

Any guesses? Well, some folks have been throwing around the idea of a Green Revolution. Lots of legitimate opportunity there, but also an opportunity for over-investment in good-sounding but bad-in-practice ideas. That's just a wild guess though, it can be anything. There have been bubbles in tulips and beanie babies, so it's not like there's any guarantee that it's going to make the least bit of sense.

Thursday, April 23, 2009

I want my emteevee

What do you think would happen if all TV shows were to be magically rendered unavailable to viewers (i.e., no cable, no satellite, no, no Netflix season DVDs, etc) for an entire year?

Nielson says that individuals average 4 hours, 35 minutes a day of television viewing. That doesn't include internet and TV-on-DVD watching. Even still, back-of-the-envelope calculation says that's 500 billion hours.

What on earth would the citizenry do with 500 billion hours of free time? Would we see giant churches? A shift to movies? An explosion in live entertainment? An explosion in the restaurant industry? Riots? Revolution (aka, an explosion in the pipe-bomb industry)? People... in... libraries?

A link posted by twifkak recently noted that TV is to the information age as gin was to the industrial age - a means through which society copes with a structure to which it hasn't quite figured out how to adapt yet. Normal people are producing and sharing more content than ever before due to the internet. Would TVs temporary hiatus push that revolution over the edge, or are we not there yet? Or perhaps we're placing a little too much faith in teleology here, perhaps that's not where we're going at all...

If you have a TV, what would you do with your time? Is your alternative method for allocating free time superior to your current, TV-based one? If so, why are you behaving the way you are presently?

If you don't have a TV, think about people that you know who do. What do you think they would do? What do you do with the time you could be spending TV? Do you think your free time choices are superior, or even that you yourself are superior to your TV viewing friends?

Monday, April 20, 2009

Robots don't sweat

So, let's say that you're a consumer. You like cheap goods, you dislike sweatshops. How do you encourage the availability of the former while discouraging the latter?

Well, imagine you are a producer of cheap goods, and that those cheap goods are produced by low-skilled workers in an environment that would be considered unpleasant by Western standards. Factory space in your third world country is pretty cheap, as are raw materials. Chances are that a major portion of your expenditure is labor, cheap though that labor may be. Worse, that's not a fixed cost - scaling up your business means scaling up your labor. For every marginal good, you pay a marginal increase in labor.

In the short run, that increase is linear - double the output, and you double the labor costs, hiring more workers, or having workers double their hours. In the long run, the scale is worse than linear - beyond a certain number of workers you need to increase levels of management, consider housing, bigger or more locations, etc.

As an alternative, perhaps you might consider automation. Robots scale much better than humans do, in terms of space and cost. The significant costs with automated production are largely fixed - the initial outlay to purchase the equipment, and the ongoing cost of upkeep. The marginal cost is relatively low - once you've got a well-maintained factory line, the n+1th product doesn't add much cost onto the nth.

A few issues here. You need an area with the infrastructure to support automation (electricity, security, etc). You need to have the money for the initial setup, or some form of loan. You also need to sell a minimum number of units a year in order to support the fixed costs of maintaining your factory and, if necessary, re-paying your loans.

The more units you sell, the more revenue you get, and the worse the bottom line gets using manual labor. Naturally, you'd want to deploy some of your new revenue toward automating. So... our consumer ought to want you to sell MORE goods rather than LESS, so as to push you over the break-even point on an investment in automation, right? Basically, a boycott is moving incentives in the wrong direction, but a purchase is rewarding behavior that you don't want, right?

Well yeah, but what of the workers currently employed? They're working a crappy job because there aren't any other jobs. As the sweatshop sells more units, they're pushed even harder, until automation makes sense financially, at which point... they're out of a job. So they take an even crappier job... Do we imagine that all of the sweatshop workers will become robot repairmen?

Note that unions and pro-labor laws can hasten this break-point in individual cases or throughout a nation. Restrictions on daily and weekly hours, minimum pay requirements, safety regulations and the like all increase the cost of the marginal worker and, by extension, the marginal unit. The higher those marginal costs get, the better automation looks.

In the long term, theory has it that manual laborers can make the transition from factory work to professional careers, working in support of a relatively more automated factory setup. That said, the US is a first world country with a world class university system... and look at Detroit. If we can't manage this kind of a transition, what hope have, e.g., China and India? Is it the manual labors who will make the transition, or their children?

I think that the crux of it is that if we don't want folks working in crappy conditions, it's on us to conjure up a way for folks of their skill, education and location to live a better life when otherwise employed. How to increase the human capital of a population, as quickly as possible? Perhaps we need robot professors.

Thursday, April 16, 2009

GDP, Value, Resources, and You

A while back, I mentioned that economies can generate wealth without theoretical limit, prompting this question:
Can you go into more detail on this? As I see it, wealth is the the amount of stuff produced divided by the amount of stuff required. AFAICT, the only two things that can change that ratio are death and technology.
Let's see if I can get at what I was getting at. I don't know much about this sort of stuff, but that's why it's time for me to start thinking about it. Thinking through writing. Which means, this will be long...

For starters, there's a matter of definition. The question above obviously considers physical, tangible stuff. Gold pieces, certainly. Houses. Perhaps iPods. What about the music ON the iPod though, in the unlikely event that it was purchased? If I paid $0.99 for a copy of a song on iTunes, does that count towards my wealth? Even though I really can't re-sell it? What sort of wealth can Apple, Inc. claim by pure fact of having that song on their servers, available for sale? How wealthy is the musician who created the song, and the label that produced it? If I purchase a dividend future against the company that owns the label, how wealthy am I? If your 401K is invested in a company who owns a derivative sold by the company that lent me the money to purchase my house, and my ability to pay that mortage is dependent upon the success of my dividend futures, which depend upon the success of the label, which depends upon the success of the musician, which depends on you spending $0.99 to buy the song on iTunes... Well, where do we all stand?

Well, chances are that Twifkak, the questioner, was referring to more physical stuff, but the physical stuff is readily exchangeable for less phyiscal stuff, like services, or intellectual property, or what have you. Surely possession of those things, or rights to those things, constitute wealth as well.

Let's ignore currency, inflation, gold standard, and all that gobbledygook for a moment. We can ignore the ins and outs of mark-to-market for the most part too. Maybe we can even move beyond the term "wealth." Let's consider resources, and value.

Resources are the things that are limited. There's only so much gold. We can only make so many iPods before we run out of the metals and plastics required. There are other resources too, like the time and effort of the workers who mine the gold, and who design and manufacture the iPods.

Value on the other hand, which is sort of what I was indicating when I used the term "wealth," is the thing that isn't really limited, and is actually kinda hard to measure. Let's consider for example, a lump of gold. The lump isn't too valuable if it's mixed up with a bunch of stone, half a mile under the ground. The same amount of gold is way more valuable in a ring, or in a computer chip.

That makes sense on the surface, but how do we know that? It's the same elemental stuff, right? Well, we know that a customer will pay more for a ring or a computer than for mining rights. What if I'm a naturalist though, and I'd rather have the stuff in the ground? Value, it seems, is subjective. What if, a decade from now, our fancy quantum computers don't require any gold? The chips won't be valuable then, will they? Value, it seems, is time-dependent.

The same thing should apply to labor, right? Consider a lawyer whose expertise is intellectual property. How valuable is his time now? How valuable was it prior to the rise of the internet and all the patent wars, plagarism and copyright wars it brought?

Okay, so value is a slippery term. Wealth, in the sense I used it, is an aggregate measurement of the value currently owned and/or produced by an individual, a group, a nation, or whatever. So, if it's a measurement, how do we measure it?

Well, this would be a convenient time to bring back currencies and markets and all that, but let's resist. In a simple understanding, folks work for currency, which they spend in some form of market, in order to get goods and services that were produced using physical (e.g., gold) and non-physical (e.g., labor) resources that they value. Currency, then, shows up on both sides of the equation, which means we can safely discard it.

The market too is on both sides - there's a market for the labor that the consumer offers in order to earn the currency, and a market for the currency that the laborer then offers in order to get what he values. Since labor is really just a fancy name for "service," we can get rid of the extraneous stuff and concentrate on the important bit: we know how much you value MY good or service by measuring how much of YOUR goods and services you're willing to give up for MINE.

Okay, let's bring currency in, finally. Since the amounts I'll be willing to give up for what you've got and you'll be willing to give up for what some third person has got are all subjective, and time-dependent, and otherwise measured in incompatible units like "hours of time spent by a trained doctor on diagnosing a patient" vs "gigabytes of storage" vs "tins of gourmet green tea in China," things get confusing fast. So fast in fact, it's almost impossible to conduct any but the simplest of economies on currency-less barter. It's currency that lets me say that I'd pay $100 an hour for a physicians care, $100 for a 500GB USB drive, and $0 for gourmet green tea, since I don't like it. If you aren't sick, don't need a hard disk, and fancy green tea, your numbers will be different.

Useful though money is, it's not really special. It's just another good. You might value yen, I might value dollars. If an elementary school economy depends on hostess cupcakes for currency (a likely scenario), prices for, e.g., bully ransom might fluctuate wildly depending on whether the school lunch is yummy or not on any given day. If I offered you a million dollars to shovel manure for a day, you'd probably do it. You value your leisure a lot, and you value not smelling manure a lot, but you value 100 million bucks more. If you knew though, beyond a shadow of a doubt, that you were going to die tomorrow night, you'd probably pass on my offer. New information means that you value dollars a whole lot less (what use are dollars to a dead man?), and your lesisure (i.e., whatever you'd do with your last day otherwise) a whole lot more. If you're afraid that the US government won't be able to pay off its treasury bills, or that the dollars it gives you when it does won't be worth too many yen, maybe you won't purchase any more bonds. You know, that kind of thing.

Okay, rambling aside and a whole lot of opened cans of worms later, what has this to do with economies generating wealth? Well, resource allocation is zero sum, but value allocation isn't exactly. If a wealthy person as a nice Porsche, then it's true that I can't have that Porsche. I could however, build my own. Or take a second job and buy one. Or make something that you thought was worth $80,000 and sell it to you. Or, I could go online, look at some photos of Italian sportscars, and, four hours later, not want the Porsche at all. Or President Obama could announce the Porsche In Every Garage initative, allocating public resources to the hostile takover of Porsche (and, perhaps necessarily, Germany) by the US government, and subsequent mass production and distribution of 911-Turbos for all. Of course, if he did so, we probably wouldn't want the Porsches any more, since everybody would have one. Including the "wealthy" people, except they'd be driving Lambos, which is what we'd want.

Which of course, is the point. This isn't about resources at all, or even goods or services. Value and wealth are way more slippery than that. The overwhelming majority of the last couple thousand years of history consists of subsistence agriculture. For a subsistence farmer, a cheeseburger would a luxury rarely or never experienced. In our age, someone earning minimum wage can secure a cheeseburger for less than 10 minutes' work. Paris Hilton probably hasn't logged 10 minutes of work in her lifetime, as some would measure such things, so how much can we say that she values the 5,000 handbag that she totes? I know I value my pocket change more than that hideous thing. Which was valued more by whom, the entire fortune possessed by Steve Ballmer, who stresses out every night over what new product Apple might be released, or the tree under which the Buddha (himself a "wealthy" prince) attained enlightenment? Who was... wealthier?

Where we're going with all of this, is that redistribution is somewhat nonsensical. The cheeseburger you can get for a buck at Wendy's is the same combination of cheese, bread and meat that would be an unattainable luxury for many today, and nearly all of our ancestors. The value of that cheeseburger though isn't what it IS, but what it REPRESENTS. The Porsche driven by an AIG exec would be just as fast if everyone had one, but way less valuable. We don't evaluate these things based on what they ARE, or how much stuff is in them and in what combination, or how long it took to make them. We evaluate them based on the status they convey, the feelings we have about them, the difficulty or relief from difficulty they bring to our lives.

These are fickle things. They can change based on what your neighbor purchases, or what disease your mother died of, or what ads were on during the super bowl. These are "relative" in the sense that we compare what we've got to what "wealthy" people have got, but that's not the extent of it. They're relative in the sense that we all value different things, and value them differently at different times. It's silliness to conceptualize a giant pool of iPods, Porsches, cancer treatments and the like, and reapportion them out to everyone. Reapportioning them would change the values anyway, and there'd be no way to balance those equations. It's just nonsense.

The economy produced the "wealth" that the stereotype of an AIG exec commands right now. His mansion, his Porsche, the "services," if we might be so blunt, of his trophy wife. Surely it'll produce much more "wealth" in the future. Cures for cancer, quantum computing. Perhaps we'll get our flying cars. Mansions for everyone in moon colonies, 200 year life spans.

Are we being anti-materialist here? I don't really think so. Buddha attained enlightenment under a tree, but did someone plant that tree? Even if it grew naturally, are there enough trees for everyone? Would he have had the time to attain enlightenment had he been working in the fields like his peasant subjects? Even a monk has a rice bowl and a robe, right? I enjoy my computer, and I eagerly await the awesome capabilities offered of my next one. But that's just it, there's always a potential next one. Workers can become more productive. Computers can be faster and smaller. Porsches can be faster, or sleeker, or get sat-nav, or the power of... FLIGHT. Moon colonies can be made more spacious. Or maybe there's a better view to be had on a planet orbiting two stars so that you can have twice the sunsets and sunrises. Or perhaps we'll just have holodecks and simulate the sunsets. But the "wealthy" will be the ones whose holodecks have better contrast ratio and don't leave that weird feeling in the back of your head after a session that's kind of like when you start walking around in normal shoes after ice skating.

Surely once all those things come to pass, our GDP will be through the roof. Even the poorest of us will be wealthier, in dollar terms, or in flying car terms, or whatever terms you'd like, than the wealthiest AIG exec.

Perhaps I should quit rambling and move onto something else. Maybe I could give World of Warcraft another try. I quit last time, since I was only level 12, and it'd take weeks to get to level 80, which I'd have to do in order to get the kickass swords. That's way too much work. If I were in charge of Blizzard, I'd hack the database and give everyone kickass swords. Then they'd be happy.

Tuesday, April 14, 2009

O Canadia?

So, do the Canadians have all the answers? Fareed Zakaria reports, I link, you decide.

A few things to think about:
  • Canadians don't have our defense budget to worry about, and that leaves a lot of room for universal health care.
  • Leverage is obviously dangerous, but how much leverage is bad? Why are/were investors investing in firms that were leveraged at 30:1? If they were before, have they learned their lesson? Or is regulation necessary?
  • Speaking of reducing leverage, I'm assuming that repealing the mortgage interest deduction will be part of the government's regulatory reform, right? Why on earth are we encouraging young family's to take on tremendous amounts of debt?
  • Budget surpluses, like universal health care, are easier to afford when you don't have the world's most expensive military.
  • We've mentioned immigration laws and brain-drain here before, and we'll likely mention it again. You can't turn around in an American grad school without bumping into a foreigner who will be training up here, but going elsewhere due to an inability to work in the US upon graduation.

Friday, April 3, 2009

The Twilight Zone

So there's this book that the tweens were reading and going crazy about. One tween would read it, go crazy about it, and then tell another tween, who would read it, and go crazy about it, and then tell a third... Well, you see how this works. There doesn't seem to be a cure for the craziness, but at first it seemed like things were okay because the tweens were only telling other tweens, not regular people, so my friends weren't effected. Lately though, it's been spreading to folks my age, and all over the internets.

I'm not sure what's to be done.

Wednesday, April 1, 2009

That's why I say hey man, nice shot...

While meandering about the interwebs, I stumbled upon a whole set of nice shots. That dude makes me want to get into landscape, which certainly hasn't been my primary interest in the photographic discipline to this point.

In related but slightly more local news, here's a sunrise I snapped on the way to work a few weeks back. As morning commutes go, well, I've had worse.

Digital and the internet have really changed photography, when you think about it. An aspiring photographer can:
  • See the results of a shot immediately after taking it (even faster than polaroid used to be)
  • Take thousands of shots with almost zero marginal cost
  • Modify ISO without changing film
  • Post-process with a laptop instead of a darkroom. Among the huge advantages here: space, undo, macros, marginal cost, etc.
  • Carry a collection of tens of thousands of photos around on a hard disk no larger than a moderately sized hardcover
  • Copy, clone, post, email, tag, share, and generally spread about photos to anyone and everyone, once again with near-zero marginal cost
Basically, after laying down a few bucks for a decent body and some glass, one can get all the practice he could ever want, nearly for free. Moreover, one can view the postings of others, also generally for free. No need to go to galleries, or buy books of prints.

Writers, musicians, graphic designers, programmers, visual artists, and scads of other "creatives" are seeing the same thing happen. As the marginal cost of production, publication and consumption head towards zero, the interaction that produces artistic movements ought to increase proportionately. You used to have to move to some physical place in order to take part in e.g., Ashcan, or Bauhaus. Now you just have to click a tag on Flickr, or DeviantArt.

In theory, this change in underlying economics should give rise to tons of new artists, movements and schools. It seems like it ought to be big enough to produce a fundamental revolution in the creative disciplines.

Of course, the flip side of all this is that the increase in signal is accompanied by an even bigger increase in noise. Not all content is good (heck, just look at his blog). Sorting through the crap in search of the decent is a really hard problem. Social filtering (Reddit) can help, automated filtering (Google) can help. At the end of the day though, there's going to be more potentially decent stuff to look at than time to look at it. Physical resources like film and glossy photo paper have been removed as a constraint, but the new constraints are time and attention, and we haven't caught up with that fact yet.

Once folks realize how valuable their time and attention are, how could we ever expect them to spend 40 hours at work, and another umpteen hours watching tv. Talk about under-valuation! It's like you give somebody a two thousand dollar laptop and then they use it as a doorstop since they haven't any idea what else it might be good for. Speaking of commutes, in a world where time and attention are incredibly valuable, who has time to drive an hour each way from the McMansion to the office?

That's some powerful stuff they've got on those interwebs now.