16 August 2017

The Only Enemies Americans Ever Eradicated

We fought the British. We fought the Mexicans. We fought the Japanese. We fought the Vietnamese. When those battles were over there were still Brits, Mexicans, Japanese, and Vietnamese.

We also fought Confederates and Nazis. Two things that were different about these wars.

One, the death toll. Including all deaths during war, from the American Revolutionary War to the wars in Iraq and Afghanistan (but not counting the deaths of Confederates), about one million American military have died. The number who died fighting Confederates and Nazis? 73% of that.

Two, when those wars were over, Confederates and Nazis had been eradicated. They no longer existed. We dropped atomic bombs on two Japanese cities but Japanese still existed at the end of that war. We took Texas and California from the Mexicans but Mexicans still existed at the end of the Mexican - American War. At the end of WWII there were no more Nazis. At the end of the Civil War there were no more Confederates. Those were the only times in history that Americans didn't just defeat an enemy but eradicated them. This would seem to make you a true American if you stand up against Confederates and Nazis

Until, of course, they started showing up at demonstrations within .... the United States.

14 August 2017

Trump's To Do List for August

Trump's (presumably partial) to do list for August

1. Take 17 day vacation on Trump property golf course
2. Criticize McConnell for not working
3. Threaten North Korea with  nuclear attack of "fire and fury"
4. Take 3 days to condemn Nazis and KKK after a violent protest
5. Hire a Communications Director who fires his Chief of Staff after calling him a "fucking paranoid schizophrenic," and then hire a new Chief of Staff who fires the Communications Director before his job had officially begun.
6. Have Secret Service exit Trump Tower after being unable to resolve dispute about how much Secret Services owes for occupying Trump Tower while protecting the president and his family
7. Encourage police to commit acts of police brutality
8. Threaten to invade Venezuela
9. Call the White House a "real dump"
10. Propose a cut to legal immigration

Curiously, in spite of such a bold and ambitious to do list, Trump's approval rating hit a new low (34%) and his disapproval ratings hit a new high (61%). (Gallup poll here.)

It's as if the American people don't appreciate how much effort it takes to get through a to do list like this in a couple of weeks. It's almost as if Americans don't deserve a man like this.

09 August 2017

The Test for Gods and Worldviews

Once upon a time people had a fairly simple test for the power of a God. They simply wanted to know, did he help you to win battles? Constantine supposedly adopted Christianity before a major battle and then won it, cementing his conversion and prompting him to make Christianity the official religion of the Roman Empire.  When Romans proved themselves stronger with their god, other communities took this as proof that this was the god to worship. A few centuries later, a similar wave of "proof" in the form of power and conquest swept down the silk routes from northern Africa to China with Islam.

It is easy to mock this test but it's not the worst test of efficacy; does adopting your god make us more powerful, more able to get what we want? For whatever limits we have in making arguments or accepting data that contradicts deeply held beliefs, we might still benefit from this simple test: does that worldview make people prosperous or poor? Does it give you the power to live a life of your choosing?

Right now facts seem to have gone out of style. Republicans and their president have largely dismissed the importance of facts, particularly the ones that challenge their worldview. People worry that the party - the country even - will never recover and will be hijacked by irrational worldviews that weaken the country. It might.

I think, though, that this worldview is too ineffectual to last long.

In San Francisco, average household income in 2015 was $119,406. In West Virginia average income was less than half that, $56,425.  Less than half of San Francisco's population is white; 94% of West Virginians are white.

Making the assumption that every baby has the same potential at conception - regardless of race or gender - San Francisco is obviously doing a better job of creating prosperity for its residents. It might be that their residents are genetically superior to West Virginians who suffer from a lack of racial diversity; or it might be that the worldview of San Franciscans is more effective than that of West Virginians.

There are a variety of ways to define the difference in worldview but one simple one is to look at how these two communities voted. Fewer than 10% of San Franciscans voted for Trump; more than two-thirds of West Virginians did.

One of two things will happen in our country. Either the Trumpian worldview will spread like a virus and the country will become like West Virginia, a place where Trump holds rallies when he wants comfort. Or people in places like West Virginia will see the worldview of the people in San Francisco - a worldview that embraces diversity and disruption, a place that funds startups rather than tries to protect a coal industry that first emerged in 1740 - as more powerful and adopt it. If the first happens, the country will look back at the 20th century as a golden time; if the second happens, West Virginians will look back fondly at the time that their grandparents adopted a new worldview that made them prosperous and powerful rather than poor and angry, roaring approval of a man who manages to connect with facts only about 25% of the time.

07 August 2017

The Pyramids of North Africa You've Never Heard of (or, how Islam spread so rapidly throughout Africa and Eurasia)

In Peter Frankopan's new book, The Silk Roads, he offers one explanation for the spread of Islam that I'd never heard before: it was a pyramid scheme.

In 614, the Persians conquered Jerusalem, the most holy city in Christendom. It is hard to overestimate how alarming this was to the Christians of the Roman Empire. "The True Cross on which Jesus was crucified was captured and sent back to the Persian capital as a trophy of war."

The Byzantine Empire (what was left of the Roman empire) won back Jerusalem in 627, seriously weakening the Persian Empire in the process.  By that point, the Persian and Byzantine empires had both been decimated. Between 628 and 632, the Persian Empire dramatically collapsed and anarchy took its place through much of its old empire. It was into this milieu that Islam emerged.

In 610, Muhammad began to receive revelations. In 622, he fled to Medina, a date that would become year one in the Islamic calendar. His revelations came out of a time when the old empires were crumbling and the holiest city was under hostile occupation.

How Islam Spread:
As the Persian Empire collapsed, Muslims began to conquer the lands and cities they lost.
"Willing to sanction material gain in return for loyalty and obedience, Muhammad declared that goods seized from non-believers were to be kept by the faithful. This closely aligned economic and religious interests.
"Those who converted to Islam early were rewarded with a proportionately greater share of the prizes, in what was effectively a pyramid system. This was formalized in the early 630s with the creation of diwan, a formal office to oversee the distribution of booty. A share of 20 percent was to be presented to the leader of the faithful, the Caliph, but the bulk was to be shared by his supporters and those who participated in successful attacks. Early adopters benefited most from new conquests while new believers were keen to enjoy the fruits of success. The result was a highly efficient motor to drive expansion."
The city of Baghdad from about the 10th century

Given the Muslims were filling in a vacuum left by falling empires, conquest sometimes required little in the way of battle. "Damascus, for instance, surrendered quickly after terms were agreed between the local bishop and attacking commander." Basically, the folks in Damascus could keep their churches open but were now expected to pay tax to the prophet rather than Constantinople. Later, the Muslims' conquest of Egypt tripled their income from taxes and often just the threat of military force against other people was enough to provoke negotiation and surrender. The Muslims ignored Europe because it was so poor, concentrating instead on the Middle East and eastward to the border of China. The result was worth billions of dollars (in today's terms), making the Muslims and all of those conquering converts rich. Very rich. One wedding in what is now Baghdad included presents from the groom to people all over the country: "gold bowls filled with silver and silver bowls filled with gold were taken around and shared out ..."

In the wake of these conquests, the Muslim world was incredibly wealthy. They were not only materially rich but intellectually rich, with leading thinkers in philosophy, physics and geography. Their thought leaders wrote about medicine and lovesickness, how the world revolves around the sun, and the concept of zero. Money funds leisure and even the pursuit of knowledge. Not all of these great thinkers were Muslim but they were drawn to its world and resources.

Islam is a religion. Curiously, its expansion seems to have been fueled by a very clever business model: profit sharing from conquest for anyone who converted. It was a model that seemed, in retrospect, to ensure plenty of converts and plenty of cities and territories in which they could live.

05 August 2017

The Entanglement of Desire, Identity and Suicide

We are creatures of desire.

Desires make us happy but can also hijack us. We can find shortcuts to satisfying desire that lead to addictions to drugs, alcohol or banana nut muffins.

Scientists have found ways to suppress desire. The good news is that this seems to work. People taking the drugs that dampen desire lose weight or stay sober. Compulsion gives way to control. That's pretty good.

The problem is that when you begin to tamper with reward centers, you begin to tamper with our reasons for being. A life without desire is a life full of control yet empty of reward. These drugs targeting the desire for food or alcohol can wipe out our desires more broadly.

Desires can - and have - taken anyone in directions they regret:  the good sex with a bad person, the 5th slices of delicious pizza that hardens arteries, the alcohol that impairs judgement.

Desires also make us different than robots or our daily planners. It's hard to find joy in rotely going through to do lists full of tasks that never feel rewarding to complete.

One of the challenges with designing drugs to target desire is one of entanglement. Part of what happens when you eat is that it lights up rewards centers - similar to what happens when you win a video game, have sex, snort cocaine, or solve an intractable problem. One problem with tamping desire for the things we shouldn't have is that it can mess up reward centers; it's an entanglement problem, a question of how you manage to take away one desire without messing up desire and reward more broadly.

When you start tinkering with desire you start flirting with suicidal impulses. These drugs that give us more control by suppressing desire also have a tendency to drive a rise in suicides. Suppressing desire can suppress the will to live. Even our less noble impulses are entangled with a reason to live and desire is entangled with what it means to be human. Kill our desires and it makes us want to kill ourselves.

Maybe the trick is to have desires but not let desires have us. Talking to a scientist this week who I was working with on a project to develop a drug targeting dangerous desires, she said that studying this has simply led her back to an embrace of the simple philosophy of, "moderation in all things."

Desire is part of our identity and that is not just the stuff of drama that dates back to Homer's stories of the gods but determines how happy we can make ourselves and others. Desire is itself something to be desired.

That's kind of fascinating.

01 August 2017

Top 26 Largest US Cities Ranked by Median Household Income

For context, US median household income for 2015 (the year reported on above) was $55,775.

Data sources:
Population of cities here.
Median household income for cities in 2015 here.

Related - highest income communities here. (Top 20 listed below, these are much smaller places and thus vary more from US median.)

25 July 2017

What To Do About the Immaturity of Systems Modeling

Sam Harris recently had a conversation with Scott Adams (Dilbert creator and author of How to Fail at Everything and Still Win Big) about Trump. Adams predicted Trump's victory because he sees Trump as a master persuader. There's a lot to say about that but Adams made a really useful distinction about what he saw as the three stages of climate change policy. He distinguishes between:
1) The reality of climate change as an ongoing phenomenon that seems to be man made;
2) The ability to simulate future climate change with good models; and,
3) An appreciation of the economic policy implications of the above.

A decade or three ago, it was fashionable to dismiss climate change. This has become problematic for at least two reasons. One, the science is not that sophisticated. Certain industrial activity releases greenhouse gases. These gases - as the name suggests - work like a greenhouse and trap heat. That science is not exactly quantum entanglement and the data for greenhouse gas emissions and resultant warming seems to track pretty well to the theory. So Adams cedes this point and allows that climate change is probably real and ongoing.

Adams worked as a financial analyst at a bank, though, and challenges the second point: the ability to simulate future climate change. He said that it reminds him of the financial models he ran as an analyst that - should they reveal something his boss didn't like - could readily be changed with just a tweak of a few variables. Given we can't really forecast accurately what might happen, it is good to be skeptical, he says.

In this he has sort of put his finger on something really important and is sort of missing the point (probably intentionally).

What is really important is that systems define so much about what does or does not go well in our world - systems as varied as the economy and financial markets, energy systems, ecosystems and school systems - and yet we really don't understand system dynamics that well. Systems are tough to model and our models are not great. This is reason to be skeptical about any predictions but it also suggests that systems modeling deserves a massive infusion of research money. A crowd was gathered to watch a hot air balloon ascend and some woman said, "What is the use of all this new technology." Benjamin Franklin answered, "Madam, what is the use of a new born infant?" Systems simulation matters a great deal and is not that mature. Better to invest more heavily in it than to walk away from it. (And I think that computers' ability to simulate systems is maturing just when that capability is most needed for shaping policy dependent on such systems.)

And even with admitted limitations of models for any systems, it is worth asking whether even the models Adams was tweaking for his boss were all that bad. Once you understand a model for an economy or business, you articulate risks, a range of outcomes, and important variables. With good models you learn what factors they are most sensitive to (housing mortgages are sensitive to widespread economic downturns or refinancing from a drop in interest rates, for instance) and even spotty historical data can give you some sense of the probability of those events. (Yes. Nassim Taleb has rightfully pointed out that markets can be rocked by unpredictable events but risk mitigation can protect you from some of these rare events. A person who has saved three years of salary is better prepared for an event "they never could have predicted" than is someone with only three months of salary.)  Financial models are a little sketchy in prediction but there are ways to gauge their efficacy in spite of a large margin of error. (For instance, only about 20% of businesses succeed past 5 years. If your bank lending model assumes that is going to raise to 50%, it will probably be wrong; if it assumes that it will raise to 25% or drop to 15%, it could be right but done properly even that should require a coherent explanation that tracks to the numbers rather than arbitrary tweaks.) Further, to the extent that Adam's boss was unique in cheating the models so that they showed what he wanted, his bank would suffer. There is a drive to make models more accurate and - within the financial world at least - big rewards for such accuracy.

Models force questions and conversations about what variables matter and they bound reasonable outcomes. It is true that climate change models will be wrong but the simplest truth is pretty easy to predict: we will emit more greenhouse gases and temperatures will be higher than they would have been without these emissions. There are a host of unknowns that come with that (will particular regions benefit or lose, will changes in wind or sea currents result in unexpected cooling in certain regions, might unforeseen natural phenomenon or new technology absorb these gases, etc.) but the general story is known. If you invest in stocks over a 25 year period you can't be sure of when your portfolio will drop by half or raise 20% a year for successive years but you can reasonably guess that over your lifetime you'll be a better shape for having saved 10% of your income than not. Same with greenhouse gases; reducing emissions will drive less uncertainty, disruption and climate change.

Denying climate change is in a long tradition of denying scientific results like the health hazards of tobacco or the notion that we orbit the sun. Climate change deniers are traditionalists who conflate market economies with oil and gas and see an admission of climate change as a threat to those forces. (It does seem like climate change will threaten oil and gas. The possibility of oil and gas being displaced by alternative energy is not a refutation of markets that periodically unleash gales of creative destruction, though, but is instead an affirmation. Markets are no more dependent on oil than horses and markets don't treat fossil fuel industries as sacred.)

As to Adams' third point about evaluating the economics of climate change policy, I'll just say this. If it is inevitable that we'll adapt new energy technologies, there is less likely to be a penalty for rushing into creating and then converting to alternative energies than there is to be a penalty for delaying that change.

24 July 2017

Why Tax Policy Is Largely Incidental to Economic Development

Two quick things about taxes.

Studies suggest that if you try to increase government revenue by raising tax rates, the rich leave. The result? Your higher tax rates result in about the same tax revenue. So, if your route to making your government more vibrant and healthy is raising tax rates, you'll fail.

Studies also suggest that tax breaks for job formation are really expensive. It looks like you have to pay about $100,000 per job by taking the tax incentive route. So, if your route to making your business sector more vibrant and healthy is lowering tax rates, you'll fail. The rest of the community is unlikely to get $100,000 back in taxes and additional business for each new job created in the area.

Tax policy - whether to raise tax rates for your government or cut tax rates for your businesses - is an admission that you don't have any good ideas for development. 

Economic development is a slow game and has a few elements. 

1. Create an alliance between city leaders, education, and industry to facilitate the creation of wealth and jobs through the creation of new businesses and technologies. Fred Terman at Stanford worked to bring in venture capitalists onto campus to collaborate with his professors and students; his early students included Hewlett and Packard.

2. Welcome and attract the best and brightest from any and everywhere. Do this by hosting conferences on important topics, by developing university programs for emerging technologies, nurturing startups with mentors and financing, and promoting a culture of entrepreneurship starting as early as high school. Alphabet (nee Google) has 70-some thousand employees and - like half of the tech companies in Silicon Valley - was co-founded by an immigrant.

3. Make your city a great place to live. This gets overlooked but ultimately you want to attract employees and entrepreneurs and world-class researchers who can afford to live anywhere and will choose to spend a good portion of their wealth and income to live in an area that they love and is stimulating. This means public works projects like art and museums and it means taking advantage of and incorporating into your city, natural beauty and / or good weather. California has relatively great weather and Seattle - a place that has created an abundance of wealth in the last 30 to 40 years - is surrounded by natural beauty. Edinburgh has developed a vibrant startup scene in part because it is such a great city that Scotland's best and brightest are happy to live there, making it easier for companies to attract talent. Creating a great community also means including a lot of voices in the definition and pursuit of quality of life. 

4. Welcome diversity. West Virginia's population has dropped in the last 50 years. California's population has gone up 4X. West Virginia is 92.3% white. California is 37.7%. From the early Silk Road that facilitated trade between folks who live in what is now Europe, Iran, India, and China to Silicon Valley, regions that have brought together people from a variety of cultures and perspectives are the regions that are more creative and prosperous. And diversity doesn't just mean skin color or cultural background. Places like California's Bay Area and Seattle have not just created billions in wealth; anyone who has spent time there will tell you that these areas are also hotbeds of radical ideas. It almost seems like it is the same magnet for diversity that will attract people from other countries, communists, and venture capitalists and if you're unwilling for one or two (or, given it is is diversity, twenty or thirty) of these categories of people and thinkers, you're unlikely to get any of them.

Each of the above points deserve their own blog post - their own set of books, really - but taxes are tools towards these goals, not something that will magically create a better community. You shouldn't invest in Business A instead of Business B simply because Business A said they need less capital, not should you be impressed that Business B needs more capital so is obviously building a more impressive business. Capital is necessary to a business just as tax revenue is necessary for a community but the fact of it being higher or lower is largely incidental to whether that business or community will prosper. 

16 July 2017

Red State, Blue State, Old Jobs, New Jobs

Edward Glaeser's Triumph of the City [2011], opens with some statistics that illustrate the remarkable contrast between big city productivity and smaller city or even rural productivity.

About half the US population "crowd together in the 3 percent of the country that is urban." "Workers in metropolitan areas with big cities earn 30 percent more than workers who aren't in metropolitan areas." And the bigger the city, the more this effect is exaggerated. "Americans who live in metropolitan areas with more than a million residents are, on average, more than 50 percent more productive than Americans who live in smaller metropolitan areas. These relationships are the same even when we take into account the education, experience, and industry of workers. They're even the same if we take individual workers' IQs into account." {emphasis added]
"On average, as the share of a country's population that is urban rises by 10 percent, the country's per capita output increases by 30 percent. Per capita incomes are almost four times higher in those countries where a majority of people in cities than in those countries where a majority of people live in rural areas."

GDP is measured by exchange. Big networks make it easier for people to easily exchange goods, services, and ideas. If you live in a rural area, two miles from your nearest neighbor, it is much harder to exchange anything than it is if you live in a densely populated area where a million neighbors are within a mile. Bit city networks are rich and complex; rural networks are sparse.
City of the Future, Lev Rudnev, 1927

There is so much to this but one comes from openness to innovation. Cities are like diversified portfolios. If you own 50 different stocks, you just accept that one (or two or four or ten) will shrink in value as markets shift; your entire portfolio may well do better in disruptive, tumultuous markets because the one (or two or four or ten) stocks that thrive through this change could create wealth that is worth multiples of what you lost in the bad stocks. The investor who owns one or two stocks sees big change as a threat because if one or two of her stocks collapse in value, the whole portfolio does. There is so much going on in a city that its people can more easily adapt to innovation and disruption. You get laid off from one failed startup and you go to work at another. In a rural area, if you get laid off from a company you may literally need to move out of state. And as a people become more open to innovation and disruption, they create more value over time than people who try to conserve what they have and protect themselves from change.

As an economic model, cities just work better than rural areas. To the extent that the country moves in the direction of what works best for rural areas, it will generally move in the wrong direction for economic progress.

12 July 2017

Things That Seem Fictional Even Now

Trump's candidacy and administration has been bizarre. If you were to make up any of the following for a novel or screenplay about politics, it would likely be rejected as too incredible.

Jared Kushner, Trump's son-in-law, who has been given authority over more domains of the executive branch than possibly anyone in the last century, owns 666 Fifth Avenue, NY.

Trump appointed Rick Perry - who as a candidate for GOP president wanted to eliminate three agencies, one of which he could not remember - to head up the agency (Energy) that he could not remember.

Within hours of the release of a report endorsed by 17 national security agencies that reported on Russia's interfering with the election to help Trump, Russia dumped private emails from Clinton's account. (Also in that same small time period was the release of Trump's notorious "grab 'em by the pussy" tape in which he talked about how when you're a celebrity women let you do anything.)

Trump's first wife Ivanka testified during their divorce trial that Trump slept with a book of Hitler's speeches by his bed.