Ridiculous Speculation

Posted on by David Wright

Here’s a theory of Human Progress: the more humans integrated economically and socially, the more progress there is.

The idea is that specialization of labour is the only reliable theory of progress. At any particular margin, innovation requires further specialization – the paths multiply like a web. The more scarce human-level intelligence is, the less innovation there is. Fewer paths are walked.

Likewise, these humans need to be brought to the font line before they can strike out on their own in their particular specialty. This is education, of course.

But the ‘system’ only really takes you to the 19th century-level of specialization; beyond that, you need to work and learn from people who work at today’s front line or, more specifically, where today’s front line is forming.

Sometimes this extra boost of education happens concurrent to the regular kind (think of computer programmers messing around on their own time, then founding a startup tech company).

THEN your training is complete and THEN you can innovate and contribute to technological progress.

Hammering a Nail Outside the Box

Posted on by David Wright

Here‘s a very interesting article on the cognitive cost of expertise. The author takes us through some studies, particularly of London Taxi drivers, that when you learn a particular skill, you have a very hard time changing that skill. London cab drivers had a tough time figuring out the new Canary Wharf layout.

“To a man with a hammer, every problem is a nail”.

This really resonates with me. The process of applying new cognitive strategies to solve problems that ‘experts’ in a field are struggling with (by, perhaps, using a strategy from another area of expertise), is called “thinking outside of the box”.

Hex Ante, Post Haste

Posted on by David Wright

I remember soon after Lehman failed, I was at lunch with a manager at a fund of funds. She said that the bailouts forestalled Armageddon. Really, I asked? Like, REALLY?

I backed down eventually because she clearly knew more about credit markets than me and was obviously genuinely, truly rattled by the prospect of all the investment banks going down.

You see that?

Right there, where I backed down.

Right where I overlooked the conflict of interest and focused on the expertise and the fear of a friend?

THAT is regulatory capture, kids.

Banker Bonuses – Shoot the Canary, Kill the Symptom, Treat the Messenger…

Posted on by David Wright

This article is pretty common. And stupid:

Investment banks, it seemed, were not being run in the interests of the economy or even of their owners, but for their staff. It was financial mutiny.

Bankers are salesmen. Just like Vacuum cleaner salesmen, jet engine salesmen and TV salesmen. If you’re selling a product that makes someone rich, they’ll pay you a big commission.

Bankers get rich because the people that buy their products get rich buying them. Their wealth the symptom of something else. Find a way to cut the bonuses/earnings of fund managers today (my favourite idea: stop friggen bailing out bondholders, for chrissakes), and banker bonuses will collapse tomorrow.

Guaranteed.