Above all, your employment relationship is not a marriage. You can stay interested in other opportunities without being unfaithful. You can walk away without going through a bitter divorce.
Much more if you follow the link.
Category Archives: business economics
The Tyranny of Metrics
The book by Jerry Muller will be out shortly. It makes a strong case against the over-use of quantitative measures to fix compensation. Education is one example.
If you believe the null hypothesis, then compensating teachers based on outcomes only introduces randomness into their pay.
Meanwhile, without referring to the book, in talking about health care and education, Megan McArdle writes,
So when we measure outputs, we are getting at best a very distorted picture of the value of the services provided. Modern industrial management is simply not designed for this sort of situation. If you feed human inputs into a machine system, you are quite likely to grind up the humans in the process.
Read the whole thing.
Resistance Watch
However, Facebook is trying to get eyeballs on ads, as is Twitter, as is Google. To do this, they fine-tune the content they show you to make it more attractive to your eyes—and by ‘attractive’ I do not mean pleasant. We humans have an evolved automatic reflex to pay attention to threats and horrors as well as pleasurable stimuli: consider the way highway traffic always slows to a crawl as it is funnelled past an accident site. The algorithms that determine what to show us when we look at Facebook or Twitter take this bias into account. You might react more strongly to a public hanging in Iran than to a couple kissing: the algorithm knows, and will show you whatever makes you pay attention.
Pointer from Tyler Cowen.
Trigger warning: lots of smug rhetoric presuming that the left is correct on climate change, net neutrality, financial regulation, etc.
Looking ahead, Stross writes,
Your phone will be aware of precisely what you like to look at on its screen. With addiction-seeking deep learning and neural-network generated images, it is in principle possible to feed you an endlessly escallating [sic] payload of arousal-maximizing inputs. It might be Facebook or Twitter messages optimized to produce outrage, or it could be porn generated by AI to appeal to kinks you aren’t even consciously aware of. But either way, the app now owns your central nervous system—and you will be monetized.
One key point on which I agree with Stross is that I am surprised and disappointed that of all of the possible ways to pay for content on the Internet, the advertising model dominates. I understand why micropayments did not take off–Clay Shirky diagnosed the “mental transactions costs” involved. But if the subscription model (what I called “clubs” in my essays from twenty years ago) were dominant, then the interests of consumers and content providers would be better aligned. With the advertising model, the relationship is necessarily adversarial. The content provider needs to grab and hold your attention, whether that works to your benefit or not. Bad consequences follow.
Resistance Watch
Two from Monday’s WSJ.
1. David Benoit in a front-page story on Apple writes,
A leading activist investor and a pension fund are saying the smartphone maker needs to respond to what some see as a growing public-health crisis of youth phone addiction.
2. Regular columnist Chris Mims writes,
In the face of pressure brought by a growing roster of Facebook investors and former executives, many of whom have publicly stated that Facebook is both psychologically addictive and harmful to democracy, the Facebook founder and chief executive has pledged to “fix” Facebook by doing several things, including “making sure that time spent on Facebook is time well spent.”
For a while, the term “gamify” was big in educational technology. The thinking was (and perhaps still is) that if you turn learning into a game, you can improve educational outcomes.
With social media, we have gamified social interaction. When people share, they look for rewards in the form of positive responses.
I am not a fan of this gamification, in either setting.
Quotation of the Day
Politics also reflects the new division. In the United States suspicion or resentment is no longer directed to the capitalists or the merely rich. It is the intellectuals–the effete snobs–who are eyed with misgiving and alarm. This should surprise no one. Nor should it be a matter for surprise when semiliterate millionaires turn up leading or financing the ignorant in struggle against the intellectually privileged and content. This reflects the relevant class distinction in our time.
This is from the 1971 edition of The New Industrial State, by John Kenneth Galbraith. He gets many things spectacularly wrong, of course. But offers insights into the role of technical expertise and Weberian organization within a large firm that are too little appreciated by today’s economists. He deserves to be re-read.
My review of Haskel and Westlake
The book is Capitalism without Capital. Recall that this is the one book that made both Tyler’s and my list of books of the year. I write,
defending the use of a cost-based method to value intangible capital strikes me as based on hope rather than theory or evidence. The overall economic value of intangible investment does not necessarily equal the resource cost spent. Indeed, strong economic performance may come from particularly good investment choices being made on average, while weak economic performance may be due to misallocation of intangible investments.
Blockchain as a solution for data integrity
From Nathan Heller’s long piece in the New Yorker about Estonia.
In a blockchain system, too, every line is contingent on what came before it. Any breach of the weave leaves a trace, and trying to cover your tracks leaves a trace, too.
. . .The blockchain makes every footprint immediately noticeable, regardless of the source. (Ruubel says that there is no possibility of a back door.) To guard secrets, K.S.I. is also able to protect information without “seeing” the information itself.
That seems like a possible use case. But my guess is that it is only practical for data records that are updated infrequently. If data is being legitimately updated multiple times a day, I would think that a blockchain ledger would be too much overhead.
But maybe I am wrong. Jason Collins points to this.
ASX is replacing the system that underpins post-trade processes of Australia’s cash equity market, known as CHESS (the Clearing House Electronic Subregister System).
ASX commenced a process of evaluating replacement options for CHESS in 2015. In January 2016, ASX selected Digital Asset as a technology partner to develop, test and demonstrate to ASX a working prototype of a post-trade platform for the cash equity market using DLT (an example of which is commonly referred to as ‘blockchain’).
That will be an interesting test to follow.
Overall, what is interesting about Estonia is the way that the leadership culture apparently revolves around knowledge of information technology. I get the impression that in the U.S. if your organization backs up its data overnight that counts as having an above-average data integrity strategy.
Blockchain as a solution in search of a problem
Kai Stinchcombe makes the case.
Each purported use case — from payments to legal documents, from escrow to voting systems—amounts to a set of contortions to add a distributed, encrypted, anonymous ledger where none was needed. What if there isn’t actually any use for a distributed ledger at all? What if, ten years after it was invented, the reason nobody has adopted a distributed ledger at scale is because nobody wants it?
I read through the comments on his piece, and they are all negative. But the attacks are ad hominem, and none of them gives an example in which blockchain has established itself as a compelling, first-choice technology in a major application involving legal transactions.
I get it that it is possible to use blockchain in many ways. One example, not found in the article, is titles on property. The U.S. property title system is a disgrace. It could be fixed with blockchain. But it also could be fixed without blockchain. The problem is entirely political: the legal profession and the title insurance industry have an iron grip on politicians, and that iron grip keeps us from modernizing the property title system. A lot of the “foreclosure scandal” that emerged when the subprime bubble popped can be traced to out antiquated property title system. But there is no will to fix that.
But mainstream adoption does not arise from usage being possible. A rule of thumb is that radical new ideas don’t get adopted as solutions to problems unless they make something ten times better. What the article is saying, as I take it, is that in actual business cases, blockchain is at best better on dimensions that do not matter to most users and often worse on dimensions that do matter.
If you are going to make comments trashing the article, please give an example of how blockchain is being used, and within that example, state specifically why blockchain is much more efficient or effective than other possible solutions.
[note: I scheduled this post before Tyler put up his post linking to the same article]
Social validation media
The only purpose of these apps — thriving in the attention economy market — is to trigger our brains into the instant gratification lifestyle, ultimately exploiting our mind’s weaknesses.
Whether in the form of a like (Facebook), a binary like/dislike format (YouTube), or a heart-shaped system (Instagram, and later Twitter) Silicon Valley has conceived a multitude of forms of innovative ways to gamify our nonstop need for social validation.
…Just like the food industry manipulates our innate biases for salt, sugar and fat with perfectly engineered combinations. Instagram, Twitter, or Facebook are built under the ¨variable rewards¨ scheme. According to Tristan Harris former Google design ethicist, the tech industry coerces our innate biases for: “Social Reciprocity (we’re built to get back to others), Social Approval (we’re built to care what others think of us), Social Comparison (how we’re doing with respect to our peers) and Novelty-Seeking (we’re built to seek surprises over the predictable)”.
I see this as the outcome of a fierce competitive process. When I was growing up, there were the three TV networks, and no remote control. All they needed in order to keep your attention was provide something moderately entertaining. Today, there is competition among web sites, smartphone apps, streaming video, cable TV, and more. It is natural that the evolutionary process has made winners of the media sources that do the best job of hacking your brain.
We have to think of our electronic devices as adversaries to some degree. We need habits and tools that allow us to focus on meaningful, long-term goals in spite of what these adversaries are trying to do to us.
Bitcoin pushback and a new analogy
This interpretation seems to depend on thinking the bitcoin just is some random asset people are speculating about. But it’s not. It’s blockchain technology, which is unquestionably important and will unquestionably change the way we do a lot of things in the technology and financial space. Bitcoin itself might lose out to another cryptocurrency, though network effects and first move advantage play a large role here. But the underlying tech is important and game changing and that pushes against your view of it as nothing but a speculative bubble. Put another way, that the dotcom bubble was a bubble and crashed doesn’t mean the internet was nothing but a speculative bubble, because the underlying tech was sound. Bitcoin, being a protocol, is more like the early internet than it is like a tulip.
It’s anonymous because ownership is tied to a private key, not an identity. Whoever has the private key owns the currency. It’s very easy to prove that you have the private key if you do have it. You can do this without revealing the key, just the fact that you have the key. It’s secure because it’s almost impossible for someone to figure out the private key.
You do lose privacy if someone manages to associate your key with your identity. But that doesn’t happen in the blockchain itself, it happens at the edges, when you need to exchange real currency or goods.
Bitcoin is produced by mining. Miners solve cryptographic puzzles, the purpose of which is to update the blockchain to reflect any new transactions. As a reward for assuming this transaction cost, miners receive payment in new bitcoins. This will continue until the middle of the next century, after which all bitcoins will have been mined. Then miners will have to charge a fee in exchange for their services. Meanwhile, the actual transaction cost is the electricity used to power the many thousands of computers that work on mining bitcoin. This is substantial, and today bitcoin is mined primarily in places with cheap electricity.
But what is the point of the whole “mining” charade? Why not just go to the fee-for-service model now?
You could start with a bank issuing crypto-currency. If the bank wants to cater to a certain breed of paranoia, it can back its crypto-currency with gold. If it just wants to cater to normal people, or cater to someone like me, it can back its crypto-currency with dollars.
I don’t understand blockchain, but let me try another analogy. Think of a blockchain real-estate title service that is perfectly robust (allowing no disagreement over who owns the property). When I want to put an addition onto my house, the contractor needs to know that I am the one with title to the house. My private key allows me to prove that. If I had some anonymous way of communicating with the contractor, then the contractor might not know who the addition is for, other than it is approved by the legitimate owner of the property.
Similarly, as the bank’s crypto-currency circulates, the folks who maintain the blockchain record system get their fees from people making the transactions. Nobody can take someone else’s currency without permission. When they obtain currency, they only know who they are taking it from if identity disclosure is an element of the transaction.
Getting back to the bank, it is a potential point of failure. It could sell its currency for dollars, then abscond with the dollars, and then never redeem its currency. The bank is not decentralized. It constitutes a single point of attack should the government in the jurisdiction where the bank is located want to shut it down or demand to see customer lists (although the bank could destroy the latter after every transaction).
So, there are risks with a crypto-currency started by a bank. But I would take those risks any day over the risks of trying to carry wealth in the form of Bitcoin.
Keep in mind that if Bitcoin does end up being like a chain letter, then it is a mathematical certainty that most of the people speculating in Bitcoin will end up losers. The only winners will be those who actually sell in time to take their paper profits, and it is mathematically impossible for most people caught in a pyramid scheme to walk off with a profit. So we can be certain that the majority of Bitcoin speculators will not sell in time.
Hyman Minsky said, “Anyone can issue currency. The trick is getting it accepted.” If a consortium of banks around the world were to issue a crypto-currency backed by dollars, then that would be a lot easier for me to accept than Bitcoin. But I am so far from comprehending the technology that I am probably just showing off my ignorance.