More on the Great Stagnation

Posted on by David Wright

Interfluidity says:

I think of government, education, health care, and finance collectively as the “information asymmetry industry”

The point there is that these industries are prone to all kinds of market breakdowns, mostly to do with producers knowing more than consumers.

In response, Arnold Kling says:

I think what distinguishes these four industries is that the sellers themselves know less than what people expect.

Hm..

TED likes to divide financial services into agency and principal businesses. I think that Kling is thinking about Principal businesses here. Agents (intermediaries, like myself) have a problem with credibility that I’ve described elsewhere, but I’m not sure that this is where we’re going.

Principal businesses aren’t really financial services, though, are they. They’re more concerned with finding asymmetric payoffs out in the streets (ie fucking people over).

Remember: “Behind every great fortune, there is a great crime”.

Interfluidity makes one more interesting point:

It’s not at all clear that what people conventionally think of as technology is the growth-limiting factor.

He then goes on to say that poor countries have lots of low hanging fruit but don’t necessarily pick it. There are social or political barriers that hold them back and maybe our own social and political barriers are holding US back.

Politics Fires Us All Up

Posted on by David Wright

I recently did tours of two tenement apartments at the NY Tenements Museum.

The tourists were mostly women, which I don’t really understand, but the tours were interesting.

Frequent polling of the group members for their “impressions of what tenements are” or ‘what we would do if we lived here and lost our job’ lent a rankling juvenile quality to the day, but I got past it.

Apparently not everyone does.

We were told one of the last questions of the day once sparked an argument so heated it shut the tour down early and forced an evacuation of the recreated 1920s apartment.

The question, asked in a living room last occupied by an immigrant family from Italy, was: “would you want the government to take care of immigrants who have lost everything?”

Yikes.

Well, FDR, the governor of NY at the time, enacted massive State welfare programs that did just that.*

To be sure, some of parts of this museum were horrifying to 21st century tastes (no indoor plumbing, blah, blah, blah).  But Mary and I both went in expecting some kind of urban refugee camp and came out unimpressed.

And to our astonishment, most of the things that we would personally find unpleasant (common outhouse toilets, no running water), were LEGISLATED ‘improvements’ and vehemently opposed by both landlords and tenants!

Why? Rents had to go up to pay for it!

So easy for sentiment to overpower the minds of an interventionist political elite.

*and, incredibly, his photograph kept Jesus and the Virgin Mary company in the living room

From the Department of “It’s Funny Because It’s True”

Posted on by David Wright

This NYT article* can be summarized thus: people don’t call each other much anymore because they use email or text.

The phone, to me, is a secondary mode of communication to email. For personal use, I almost never pick up the phone and I certainly never want to.

For business use, I will make a call for the following reasons (in order of importance):

1. When I don’t want a conversation to be recorded for posterity for some reason

2. To explain something I’ve tried to write an email about before deciding it was too complicated to explain clearly in writing

3. To badger someone into responding to an email I’ve sent

4. Introductory calls. Cold calls are a subset here, but the vast majority of these calls happen following an introductory email

I also always pick up the phone at work, of course. But I’d say that 75% of the calls I have are made by me. Reverse ratio for emails, but most incoming is junk.

*P.S. Yglesias has a very funny commenter on this article:

God I hate New York Times Style section cultural trend pieces that are actually just anecdotes about the writer and her insufferable acquaintances.

Yune-Yawns

Posted on by David Wright

The anniversary of the Triangle Shirtwaist Factory fire is this week. This event has been coming up in my life frequently of late.

Mary and I just got through this part in a giant 6-part documentary on the history of new York; we recently went through the tenement museum here, which deals with ‘those kinds of issues’; and, on account of the anniversary, there’s been some press comparing that event to political battle over unions in Wisconsin.

It’s a gruesome event and, unsurprisingly, served as a catalyst for pro-union legislation, improvements in workplace safety and I believe its occurrence prevented other such tragedies.

But my hackles always get raised when presented with one-sided narratives. The kind of self-satisfied ease with which left -leaning folks present this event and its ‘context’ only avails itself to the victors of history. Sacrilegious as it is to say, I bet that most factory conditions of the day were tolerable by the standards of the day.

Most isn’t all, of course, and a single disaster like this is enough to condemn the entire system supporting it.

Much as unions really irritate me, I’m not terribly surprised they exist.

Steamroller Strikes

Posted on by David Wright

Scott Sumner teaches us to “never reason from a price change” and start a step earlier.

Felix passes with his analysis of the sky-rocketing exchange rate.

[W]hat we’re seeing here is a function of ultra-leveraged hedge funds unwinding their carry trades.

In other words, getting hit by the steamroller.

Borrow Yen to invest in US bonds and cream the difference. If the Yen suddenly gets super expensive? Effing Effed.

Everyone’s freaking out, though, because spiking currency values also implies (imposes?) excessively tight money, an economy killer. Menzie Chinn reports a successful G7 intervention:

This means that, implicitly, these carry traders are getting bailed out,  non?

Post PC World?!

Posted on by David Wright

The post-PC world is not heralded by the iPad, regardless of what Steve Jobs says. You need a PC to use the thing!

When I hear ‘Post-PC World’, I think people are really talking about a few trends:

  1. Computing power is very rarely a limiting factor for function these days
  2. Hardware is getting smaller and cheaper
  3. Software is a more important frontier

I think that this insurance technology blog, gets the trend right, but screws up the attribution. For instance, this sentence doesn’t make sense:

There will be no patience for slow software, no perseverance for software that isn’t easy to use and an expectation that they can interact with the insurer in a way that works for them.

Rubbish. People have always hated crappy software. What’s changed is that there is much more supply of excellent software.

Like most economics, this is not about demand. It’s about supply.

To me, the main effect that computing trends are going to have on the insurance industry is to reduce costs and so reduce premiums. But the slow grind of process improvements are only newsworthy over large timescales.

People want game changers!

I am reminded of SRW’s response to Cowen’s TGS:

I think that Cowen is lamenting a scarcity of breathtaking [technological] resets… Electricity helped make bread cheaper. But I don’t think cheap bread impresses Cowen as much as the fact that, post-electricity, humans colonized the night and Presidents colonized living rooms.

Indeed.

Spectators Want Speed?

Posted on by David Wright

I remember the first time I ever watched myself on video playing football. I was horrified at how slow the game moved. It was like everyone was trapped in glue.

Of course, I’m used to watching the NFL on TV. Bit of a difference.

I’m watching a lot of college basketball right now and I think that the games at the highest levels of the NCAA play just as fast as NBA games. Honestly, I think they can sometimes play even faster. But the best NCAA teams would get crushed by any NBA team because they’re so much smaller.

The NFL and NHL are a more balanced upgrade of both. A sport like soccer or tennis would be entirely about the players doing what lower level players do, but at 1.x the pace.

I’d say the speed of a given level of sport relative to the highest level is a pretty good predictor of how much I’m going to enjoy watching it. It’s certainly why I don’t enjoy womens’ sports much.

What about baseball? I don’t really care. This ain’t science, kids, it’s sportswriting.

In the Land of Two-Eyed Men, What Does Michael Porter Think?

Posted on by David Wright

The Economist has a review of Michael Porter’s latest contribution. I skimmed it long enough to satisfyingly affirm my revulsion to ‘business’ as an intellectual discipline.*

A couple of years ago, I was considering opening a retail store and emailed a former marketing prof for a textbook recommendation.

He came through and, for the first time in my life, I genuinely read a damn textbook.

My god, what a load of crap.

Because I was looking for insight on, you know, how to actually manage a retail business, the book was useless. I read the thing in an hour – it was about 40% explicit filler (summaries, Q&A, indexes, case studies and graphics), 50% stealth filler (fluff  ‘filling ideas out’) and 10% real content.

Not much to actually learn but lots of useless junk you can memorize and immediately forget.

This is the classic High School BS Method. First you need  some idea, as fine-spun a thread as it may be. Then grimly stuff  it with the largest, foulest payload of BS you have time to get down. Gotta fill the page!

And it’s not just marketing – marvel at the bounty the ‘science’ of finance has reaped for the world!

For me, business education (hell, maybe ALL education) works like this: find a problem and try to solve it.

Your solution will probably fail, but try again. Maximize your chance at success  by asking people who have some relevant experience for advice.

Best case: work in teams and punish freeloading.

‘Ideas’ and ‘intelligence” are red herrings. Social intelligence matters (can you play with others?). Drive matters. Experience matters, but that’s only a function of social intelligence, drive and time.

I know that execution is boring, seems easy and doesn’t get people excited, but that’s actually the whole game.

Perhaps ironically, the version of this argument for the softest part of execution, people management, draws on Google’s experience:

Mr. Bock’s group found that technical expertise — the ability, say, to write computer code in your sleep — ranked dead last among Google’s big eight. What employees valued most were even-keeled bosses who made time for one-on-one meetings, who helped people puzzle through problems by asking questions, not dictating answers, and who took an interest in employees’ lives and careers.

Social intelligence and work ethic. The end.

*Drucker is excused from all this, of course.

Now We’re Talkin’!

Posted on by David Wright

Finally, some real innovation!

A new online system from the Chubb Group of Insurance Companies… allows drug and medical device developers to quickly secure required insurance documentation for clinical trials around the globe.

“If a clinical trial is delayed because a certificate of insurance is not available, inaccurate or incomplete, it also shortens the timeframe during which a life sciences company enjoys patent exclusivity,” added Goudsmit

Now THAT’s something of value to the world. Like, literally measurable economic benefit.

Even if some of us are skeptical of IP.

Well done, Chubb!