29 August 2014

Fields, Markets, Dialogue and the Empty Space Between Things That Defines Them

Systems realities emerge out of interaction. To understand them, you don't look to the parts but rather the interaction between those parts. The space between parts that defines those parts could be referred to as fields, markets, or dialogue. 

Here's something Einstein wrote that I think can be adapted for use in multiple spaces. 

"A new concept appeared in physics, the most important invention since Newton's time: the field. It needed great scientific imagination to realize that it is not the charges nor the particles but the field in the space between the charges and the particles that is essential for the description of physical phenomena."*

I wonder if this insight could be simply changed to describe economics, like this. 
"A new concept appeared in economics: the market. It needed great imagination to realize that it is not the institutions nor the individuals in them but the field in the space between institutions and individuals that is essential for the description of economic phenomena."

Or perhaps society could be defined like this.
“A new concept appeared in sociology: dialogue. It required great imagination to realize that it is not society or the individuals in it but the dialogue in the space between society and individuals that is essential for description of social phenomena.”

Individuals define their society and the way they interact but of course society defines individuals. You’ll never understand either without understanding both. Or perhaps more importantly, without understanding the relationship between the two.

This is one reason that it’s so important for people to be heard. You can’t define a relationship without a dialogue. Monologues simply broadcast the status quo; dialogues involve both parties and allow for a change in the relationship. Given society can’t change without change from individuals and individuals can’t change without change from society, the first step to changing this relationship is a dialogue about it. Shut people up, shut them down, and nothing changes. Silence is a loud vote for the status quo.

*Albert Einstein, quoted p. 92 of Walter Isaacson's Einstein: His Life and Universe, Simon & Schuster, New York, NY 2007.

23 August 2014

Dow Tops 17,000. Are Stock Market Returns Steadily Improving?

The Dow closed above 17,000 for the week. In the 1999 bull market, it peaked at about 11,500 and in the pre-Great Recession market of 2007, it peaked at nearly 14,000. It is at a new high. I may have to re-think taking advice from the Tea Party. If they are right that he's a socialist, it is terribly confusing that capital markets have performed so well during Obama's administration.

Here's an interesting list ranking stock market performance during a president (using the closing number as the end of the year they left office - typically 9 to 11 months after their successor is sworn in).

Dow Jones, Avg. Annual Returns

Calvin Coolidge (R) 32%
William Clinton  (D) 26%
Ronald Reagan (R) 24%
Dwight Eisenhower  (R) 19%
George H. Bush  (R) 17%
Franklin Roosevelt  (D) 15%
Warren Harding  (R) 13%
Harry Truman  (D) 10%
John Kennedy  (D) 8%
Gerald Ford  (R) 4%
Lyndon Johnson  (D) 3%
Teddy Roosevelt  (R) 1%
George W. Bush  (R) 0%
William Taft  (R) 0%
Woodrow Wilson  (D) -1%
James Carter  (D) -2%
Richard Nixon  (R) -6%
Herbert Hoover  (R) -17%

During Obama's administration the market is up an average of 21% per year, which would put him between those other socialists, Reagan and Eisenhower. It would also mean that 4 of the last 5 presidents are among the top 6 administrations in terms of stock market performance. That suggests that market returns have been going up in the last 30-some years.

This chart, however, suggests that it is less a matter of positive years getting better than it is negative years becoming less severe. Perhaps this has nothing to do with presidential policy but instead reflects the fact that the Federal Reserve is getting better at mitigating risk in the market. Market contractions are becoming shorter in duration and less severe. That's enough to help anyone's performance.

Why They're Finally Legalizing Pot - Or How They're Preparing Us for When Robots Take Over

I had come to my favorite deli to dine with my octogenarian friend Bernard. He had his 20-something grandnephew Delbert with him. My initial discomfort with Delbert has melted as I realized he was a fount of odd conspiracy theories, which I have a weakness for collecting.

"Delbert," I exclaimed as I sat down. "It's been a long time. You've been keeping busy?"

"Dude," he exclaimed back. "You have no idea."

"It's certainly true," Bernard injected, "that I have no idea. This kid has been going on about programmable synapticons and the obsolescence of humanity."

"Programmable neurons and synapses, Bernie. There is no such thing as a synapticon."

"What are we talking about," I inquired.

"Robots! They are no longer on the other side of the globe. They are on the horizon. We can see them, dude, and they are going to make us obsolete."

"This sounds more like a 1970s sort of sci-fi than a 2010s reality," I countered. "People used to talk about robots but that is so passe."

"That's like a half century ago," Delbert pointed out, his math only slightly off. "That's like forever in robotics evolution. And that's the problem. They aren't just about to be smarter than us. They will be just picking up speed as they pass us."

"When will that be," I asked, expecting some vague answer from Delbert. I was surprised by his precise response.

"2042, dude. I'll be like your age."

"How do you get 2042?"

"This guy James Barrat has studied artificial intelligence and he says that the average of the experts' estimate of when we'll finally have a computer as smart as, say, a recent college grad is 2042. And of course then they'll be able to re-design themselves, intentionally evolve in ways that we can't. But everybody is working on this computer. It'll be like having smart college grads who don't get distracted by hunger or relationships or Facebook or bathroom breaks. These things will really be able to work 24/7. IBM, DARPA, Israel, Google ... everybody is racing to create this first because they'll make monster money from it."

"So these are real experts. Not sci-fi?"

"Dude, that's just it. It was sci-fi in 1865 when Jules Verne wrote about going to the moon. 100 years later, in 1965, it was actual science that NASA was just a few years away from making real. Now, you think robots smarter than us are sci-fi in the 1970s and again, about a century later, it will be actual science."

"Wow." It was an inane response, one that would probably take all of two lines of code to turn over to a robot. Still, it was all I could think to say. I suddenly felt like it would take a pull-string doll and not a robot to replace me.

"Which is why they're finally legalizing pot, dude."

"Wait. What?"

"Think about it. They subsidize drugs that make us productive, right? We have prescription drugs that help us to feel less anxious, help us to focus at work. We have drugs that help us to sleep at night so we're productive the next day at work. Those drugs aren't just legal. They're subsidized. They want us to have them. Because they need us to be productive for the economy to work. But drugs that just make you happy without forcing you to first be productive? They've been totally illegal dude. And now they're changing that."

"Sorry to be so slow, Delbert, but what's the connection?"

"The robots are going to do all the work. We won't need to. So we don't need to be productive anymore. And it'll make it easier for them to take over because if we're happily stoned, we won't care so much."

"So we won't have a role anymore?"

"Well, maybe they'll keep us to buy the stuff they make. Robots are just as happy to work. What do they know about recreation, right? Or going to the mall," he chuckled at the vision of robots with shopping baskets on their arms as they shopped for shoes or ripe pears. "So maybe our role will be consumers.You know," he shrugged, "to keep the whole cycle going."

"Or they'll keep us as pets," Bernard interjected caustically.

"Dude," Delbert turned excitedly. "Exactly. There's a guy whose only goal in life is to teach robots empathy so that when they take over they'll be kind to us and keep us as, like, pets or maybe servants. Because this guy - and he's an expert - he's convinced they're taking over in just a couple more decades."

"So what does a person do in this brave new future if he doesn't care for pot," I asked.

"I don't know, dude. Maybe you could play video games?"

Oh, and lest you think that Delbert is making everything up, here's an intriguing video that my friend Damon sent me, suggesting that we will, indeed, be made obsolete about the time today's babies would enter the workforce. If indeed it takes that long.

19 August 2014

Poverty in the Former Confederacy

The US Conference of Mayors just released a report that includes this table:

Richard Florida uses this as another example of the increasing wage gap in the US. People in the bottom of the list are twice as likely to be getting by with incomes of less than $35,000 than people at the top of the list.  That makes a huge difference to a community. I think it's just further example of how policies that have their roots in the Civil War continue to cost us. Every single metropolitan area in the top ten in this list - from the ones in Texas to Georgia to Louisiana to Arkansas to West Virginia - is in the former confederacy. Every single metropolitan area on the bottom of this list - from Manchester, NH, to Washington, DC - is outside of it.

There are really just two ways to explain why some people are poor and some are not. One is to look for differences in their situation, using something like a pareto chart to understand the impact of parents' income, community investments in education and private investments in capital, etc. In this approach, generational wealth and income are subject to forces that can be manipulated and changed through policy and private action. Another is to say, "Well, some people are just like that." Under this umbrella lies belief in aristocracy, celebrity-worship, racism, and a shrug of the shoulders about differences, a weird sort of acceptance of life's inevitability (or even God's will). It's no coincidence that the former Confederacy is - to this day - a place where poverty and poor education is more rampant than in any other in this country. Racism is, of course, the ultimate belief in one's helplessness to change realities like income disparity.This region has been very reluctant to let go of its racists beliefs.  (It wasn't until February of 2013 that Mississippi officially abolished slavery.) It's still a place that rejects policies that would change incomes as the intrusion of "big government." A goodly portion of the south is still accepting of poverty and shrugs its shoulders about why some people are poor. In their minds, little can be done and so little is done. 

I think it would be worth tracking two economies as we seek to understand what's happening in the US. I suspect that tracking the former confederacy and the rest of the country separately would yield some interesting data that would help to make policies on both sides of this (still big) cultural divide. 

12 August 2014

A Big Day for Women in Math and Science

On this day, in 1942, movie star Hedy Lamarr patented spread spectrum communications and frequency hopping, a technology that is the basis for modern WiFi and Bluetooth.

Today, exactly 72 years later, Iranian-born Maryam Mirzakhani became the first woman in history to win the Fields Medal - mathematics equivalent to the Nobel Prize. 

So, it only takes a half century or so, but women are eventually getting recognition for achievements in math and science without being talented enough to co-star with of the likes of Clark Gable and Spencer Tracy, Lana Turner and Judy Garland. Or, perhaps, Stanford's Mirzakhani simply hasn't yet taken the time to show that side of her talents.

10 August 2014

"Corporate entrepreneurship and innovation will be the next big thing for the next 10 years" - Steve Blank

Steve Blank recently said,

Corporate entrepreneurship and innovation will be the next big thing for the next 10 years, and the business school that sets up a program for that will be printing money from executive education and gradating a cadre of MBAs who will be snapped up by large companies that are desperate to reintroduce innovation inside their corporations.
Are any business schools making strides in corporate innovation? Corporate innovation is something that’s coming down the pipe. But I haven’t seen a business school that has understood that this is a big idea. The first couple that do will own the space. It’s wide open. We’re going to have a great time in the next five to 10 years.
This is a huge opportunity and unmet need – business schools haven’t pivoted yet. Now they’re getting the startup innovation courses right, but corporate innovation is a lot more complicated, and the startup techniques and classes don’t apply. There has been very little literature and research on the subject. 
I find this affirming because Blank has been ahead of the curve for probably a decade and the fact that he's seeing the need to make corporations more entrepreneurial aligns with the ideas I've been advocating for decades.

I think that the popularization of entrepreneurship is going to transform the corporation because so many of us are employees now. We couldn't leave knowledge work to autodidacts last century and we can't leave entrepreneurship to the innovative few outside of corporations in this.

Some people are beginning to understand that entrepreneurship will lead development now the way that capital did in the 19th century or the way that knowledge work did in the last. I'm still not hearing much about how that will transform business, but if people aren't talking about that, they still don't fully understand what we're facing. Popularizing entrepreneurship within the corporation will transform it as much as mutual funds and credit cards transformed finance and as much as democracy transformed the nation-state.

Market Economy
Big Social Transformation
Where Power is Dispersed
First, Agricultural
1300 to 1700
Second, Industrial
1700 to 1900
Third, Information
1900 to 2000
Bank & Financial Markets
Fourth, Entrepreneurial
2000 ~

Why the Resolution of a Centuries Old Debate Between Spinoza and Descartes Calls Free Speech Into Question

"I can't believe that!" said Alice.
"Can't you?" the Queen said in a pitying tone. "Try again: draw a long breath and shut your eyes."
Alice laughed. "There's no use trying," she said: "One can't believe impossible things."
"I daresay you haven't had much practice," said the Queen. "When I was your age I always did it for half-an-hour a day. Why sometimes I've believed as many as six impossible things before breakfast."
- Lewis Carroll

Intriguing paper from three University of Texas researchers on belief that tests Spinoza and Descartes notions of how we come to believe. Descartes thought that we comprehend something and then choose whether or not to believe it. For him, belief was separate from understanding and came later. Spinoza did not agree. He thought that belief was integral to understanding, that we accept a statement in order to comprehend it. For him, it was un-believing that came after and required the effort and belief that came automatically. Belief did not have to be done but instead had to be undone.

Gilbert, Tafarodi, and Malone's studies give weight to Spinoza's view: believing simply happens through the act of comprehension. The act of unbelieving relies on logical capacity, correct information, or cognitive resources. No everybody has these. You can reject the notion that Smith is pregnant if you know Smith is a man (logical capacity) but you can't reject it if you have wrong information (you thought Smith was a woman). Obviously, quite a few people are lacking either the logic, correct information, or cognitive resources needed to refute lies. For these people, exposure to an idea will mean belief in it. This is obviously troubling in a world in which freedom of speech is protected.

The authors, knowing that bad ideas in circulation are likely to be embraced (by at least a few) once we've been exposed to them, still vote for freedom of speech. Their reasoning is that conversation has the potential to help people take a skeptical approach to something false they've heard, but conversation between people can't help them to believe in true statements they haven't heard. In their words,
In short, people can potentially repair their beliefs in stupid ideas, but they cannot generate all the smart ideas that they have failed to encounter. Prior restraint [e.g., censoring political dissent or pornography] is probably a more effective form of belief control than is unbelieving, but its stunning effectiveness is its most troublesome cost. 
What does this mean? Apparently we don't adopt beliefs. They, instead, adopt us. It's worth examining your beliefs from time to time to decide which ones to reject, knowing that barring this act of intentional skepticism we're likely to protect ideas that don't deserve it. If anything, their studies suggest that you're likely biased more towards beliefs that don't deserve protecting than biased towards refuting beliefs that do.

The paper:
You Can't Not Believe Everything You Read
Daniel T. Gilbert
Department of Psychology University of Texas at Austin
Romin W. Tafarodi
Department of Psychology University of Texas at Austin
Patrick S. Malone
Department of Psychology University of Texas at Austin

09 August 2014

California Cuts Back on Investments in the Future

Pat Brown - current governor Jerry Brown's dad - was governor of California from 1959 to 1967. In 1960, he made California the first state in the nation with a college system designed for all high school graduates. The University of California (UC) system that included Berkeley and UCLA was designed for the top 25% of high school graduates. The State system that included San Diego State University and Fresno State was designed for the top 50%. The community college system was designed for all high school graduates. At the time, it was an incredibly visionary - seemingly excessive - investment in the future.

I'm not alone in believing that it is no coincidence that California is the state that later became home to two of the great advances in human history: Silicon Valley and Bio-tech. But there was real lag between Pat Brown laying the foundation in 1960 and the founding of Apple and Genentech in 1976, much less the tech boom of the 1990s.

All that to say that it's worth paying attention to the fact that the golden state is now cutting back on its investments in education. Not only is it becoming more expensive for college students but even in K-12, the state is failing to invest. California has the worst pupil-to-student ratio in the country.

It's hard to imagine this is going to mean anything good for the state in 2030. Jerry Brown has helped to balance California's budget, showing himself a more able accountant than Arnold. Now we can hope that he shows himself to be as savvy an investor as his dad and reverses California's fall into educational mediocrity.

08 August 2014

Huck Finn and a New American Aristocracy

Huck Finn, the son of a drunken father, is himself described as idle and lawless. But he tries to flee this fate with Jim, a runaway slave. In these two characters, Twain foreshadows the struggle out of poverty in the 20th century, the both of them attempting to escape their own destiny, whether the consequence of racism or childhood poverty. In the mid-19th century, this was such a big country that such an escape seemed plausible - almost inevitable. The US offered the possibility of freedom from the past.

America was the country that was first to throw off a belief in aristocracy, which had defined Europe for centuries. In its place the founding fathers put in place things like elections and meritocracy, creating a country where a hairdresser's son could grow up to become president. de Tocqueville visited the US about the time the (fictional) Huck Finn was dashing about, and he found a great deal about this country that amazed him. 

Now, visitors from Western Europe would find a different reason to be amazed. Compared to them, the US has become a land of aristocracy more than meritocracy. In the US, the children of the rich are likely to become rich adults and the children of the poor are likely to become poor adults. Americans don't decide how they do in life. Their parents do.

In a paper on inter-generational mobility, Miles Corak includes this graph he has dubbed "The Great Gatsby Curve." 

Finland finishes best on the measure of income mobility and income equality and the US finishes worst. Not only do we have more income inequality but we don't let the children of the poor forget their place (or the children of the rich lose it). It seems to me that one obvious way to remedy this would be policies that support poor mothers. 

It is also possible that Finland's much praised education system could teach us something about how to give each generation the opportunity to rise. Here are a couple of lines describing what they have done in recent decades. 

Beginning in the 1970s, Finland launched reforms to equalize educational opportunity by first eliminating the practice of separating students into very different tracks based on their test scores, and then by eliminating the examinations themselves. This occurred in two stages between 1972 and 1982, and a common curriculum, through the end of high school, was developed throughout the entire system. These changes were intended to equalize educational outcomes and provide more open access to higher education. During this time, social supports for children and families were also enacted, including health and dental care, special education services, and transportation to schools.
There are no external standardized tests used to rank students or schools in Finland, and most teacher feedback to students is in narrative form, emphasizing descriptions of their learning progress and areas for growth. 
I find it rather charming to think that treating students as individuals - rather than as a percentile - is a step towards letting individuals - rather than families - define a life. Whatever mix of policies they're pursuing, the Finns are now doing what we started - making it possible for each generation to define themselves anew.

Now if Huck wanted to escape the destiny of his past, he'd have better luck heading back to Finland than down the Mississippi. 

05 August 2014

Medieval Relics, From Baby Jesus to Hitler

In the medieval world, miracles were still common and religious symbolism was not symbolic.  Wilsnack is today a tiny town of about 2,000, halfway between Berlin and Hamburg and yet because of reports that during a fire the Host – the holy bread used for communion – not only survived but bled, it was the fourth most popular destination for pilgrims (Rome and Jerusalem being first and second on that list). [1]  Monasteries attracted pilgrims with claims that they items like pieces of the crown Christ wore on the cross, his baby teeth, or umbilical cord (a double relic, of both Jesus and Mary).

The statue of St Longinus byGianlorenzo Bernini sits
above the relic in St Peter's Basilica
Even the pope’s own treasury of relics included the holy prepuce cut away when baby Jesus was circumcised. “Saint Catherine was often painted with Jesus putting a ring on her finger in a mystical marriage, but she said in letter after letter that the true marriage with Jesus was sealed with the ring of his circumcised flesh on the spouse’s fingers.” [2]

These beliefs did not die quickly. To give some appreciation of the degree to which Hitler tried to turn back time, after he had invaded Austria, Hitler quickly stole the Spear of Destiny. This was the spear reportedly used to pierce Christ’s side when he was on the cross. Since the time of Charlemagne, leaders of the Holy Roman Empire had held this spear with the apparent belief that possessing it gave one power to rule. (In their defense, they presided over an empire that lasted – in various forms – for roughly 1,000 years, from 800 to 1803.)  It was a relic that held magic that Hitler trusted, and this less than a century ago.

[1] Gary Willis, Why Priests? A Failed Tradition (Viking, New York, NY, 2013) p. 35.
[2] Gary Willis, Why Priests? A Failed Tradition (Viking, New York, NY, 2013) p. 39.

04 August 2014

Texting, How a Fear of Loss Drives Politics, and an Octogenarian's Idea for an App

It had been too long since I’d seen Bernard, my invisible octogenarian friend. (Although he hates that I point this out about him, the fact that he’s invisible. He said it hardly matters anymore what with all the time people spend in the virtual world.) He was excitedly explaining his latest idea to me even before I sat down.

“I’ve got an idea for an app,” he announced.
“You? You, an 80 year old who still hasn’t learned how to use a Typewriter, are going to create an app?”
He waved his hand. “I didn’t say I was going to program it. I just have an-,” and before I could respond he said, “Just shut up and listen to this idea I have about communication.”
I had to laugh. “Your idea about communication is that I shut up?”
“Well, no. I mean, I guess yes.” He stopped and shook his head. “See. This is why you have to just let me talk.”

“I want to create something that will be better than texting or email.” His eyes lit up and he fanned his hands like a magician,” Imagine that when you communicate with someone you have to think about what you are saying and compose your thoughts onto a page. Take the time to write sentences and paragraphs. And then once you are done – a process that could take an hour or even span days – you would have to enclose this note manually into a slender container that you would also write upon and then take to one of thousands of boxes scattered throughout the city. From there, someone would take it to the person you wrote to. Then you would wait for a reply. And that reply might take days or weeks.”
“That’s your app,” I grimace. “Really?”
“Well, that’s pretty visionary. I mean, if you were living in the 18th century. You’ve basically described the US Postal Service.”
“I know! But don’t tell the kids that!”
“Why, Bernard?”

“Well rather than encourage kids to communicate whatever feeling disguised as a thought that would flit through their consciousness like a moth chasing a firefly, the way that texting does, it would force them to be more thoughtful, to write about things that would still matter in two weeks. It would teach delay of gratification, forcing them to wait for that most essential of human needs, communication. And all of this combined would encourage Victorian values.”

“You’ve really thought this through, haven’t you?”
“Of course. What else do I have to do with my spare time?”
“I always thought of you as more modern, Bernard. Victorian values? Really?”
“I think we could use those,” he said, sitting back defensively.
“Isn’t it a little late for that?”

“Maybe,” he acknowledged petulantly. “But think about how indulgent we’ve become. It’s old people who vote Republican. They don’t do this because they’re trying to create a better world. They do this because they are afraid that if Democrats win the election they’ll take their money. And young people vote Democrat. Why? Because they’re afraid that if Republicans win they won’t let them have sex.
“Our politics aren't driven by any vision of the future. It’s driven by fear of loss, people desperately grasping onto their little trinkets disguised as treasures."
"Well I don't know Bernard," I interrupted. "I'm middle aged. I happen to think that money and sex are pretty cool. You could have worse trinkets."
He sighed. "My point is that politics are driven by fear of loss, not hope for gain. Victorian values would do people some good, teach them to think about what they’re creating rather than what they have, teach them to consider denial rather than indulgence.”

“So texting has made us short-sighted.”
“Well of course it has. How else do you explain it?”
Even with stationary and a lazy afternoon before me, I don’t think that I could have managed a proper response.

03 August 2014

The Future of History Looks Bleak

If I wiped your memory clean you'd be gone. Assuming that it caused no brain damage and you were able to learn anew, you could conceivably become another you, but that new you devoid of all your old memories would be someone else, about as similar to the old you as any other person on the street.

As they lose their memory, people with Alzheimer's lose their personality. Not only is it true that they begin to have trouble recognizing other people. Other people have trouble recognizing them.

Society is the same way. If you change the story about your past, you change who you are now. History matters because it tells people how they got here and suggests what needs to be preserved and abandoned. Apparently, though, we're losing interest in history, caught up in the now. It could be that people think that things are changing so rapidly that it's best not to be encumbered by history.

This graph shows the diminishing interest in history as tracked by Google. It's down about 80% since 2004.

Just extrapolating this trend, one would have to conclude that the future of history looks bleak. I wonder if that means it's going to be harder to recognize who we are. 

01 August 2014

The Lazy Days of Summer

July job numbers were up 209,000, less than the 230,000 folks were estimating. There are a few things of interest about this number.

1. Since 1939, there has been only one uninterrupted streak of monthly job creation that has lasted longer. It's now been 46 months in a row of net positive job creation. In two months, the current streak will be tied for longest ever uninterrupted streak.

2. And speaking of streaks, the economy has now created more than 200,000 jobs for six months in a row. That makes it the longest streak of 200k+ since 1997.

3. The average monthly job creation so far this year is 230,000. Assuming that average holds, it would mean 2.7 million jobs for 2014, which would make this the best year for job creation since 1999. We may finally be leaving the naughts (2000 to 2009) behind.

4. There are some folks who feel this 209,000, a drop from the last three months, hints at a cooling down of the economy. It might, instead, simply suggest reflect a deeper pattern that has to do with the lazy days of summer. During the last five years, July and August have been the slowest months for job creation. (And April and May are the busiest months.) July is down a tad from the previous months but it is down less than typical. (The average fluctuation throughout the last five years is shown below.)

Simply put, there is nothing to suggest that this recovery is faltering. Not yet.