IT and productivity - two noteworthy posts from Equitable Growth

Brad DeLong, as best I can tell, does not lead the Washington Center for Equitable growth. Along with Nick Bunker he does, however, produce many of their best blog posts (RSS icon proudly displayed) - like two from a Hamilton Project Future of Work conference (intro PDF, Brynjolfsson and McAfee [1]) that I recently posted back-to-back in my app.net feed.

The first is by Brad, taken from a Larry Summers speech which explains why Summers matters (emphases mine) …

Morning Must-Watch: Larry Summers and Friends: The Future of Work - Washington Center for Equitable Growth

… we have enormous antidotal evidence and visual evidence of [modern IT/AI] technology having huge and pervasive effects … On the other hand, the productivity statistics over the last dozen years are dismal. Any fully-satisfactory synthetic view has to reconcile those two observations…

… I think it is a mistake to think of the economy as homogeneous–as producing something called “output”. As we approach these issues, an aspect that doesn’t get enough attention is that sectors through progress work themselves into economic irrelevance. … candle-making was a major industry in the 1800s, illumination is a trivial industry today…. 

We need to recognize that a sector that has rapid technological progress but of which the world can absorb only so much becomes ultimately unimportant in the economy….

…Consider two goods today: a television set, and a year at a university (or I could use a day in a hospital). The consumer price index for the latter two categories is in the neighborhood of 600. the consumer price index for the former category is 6. There has been a hundredfold change in the relative price of TV sets and the provision of basic education and health care services.

If anybody is wondering why governments can’t afford to do the things they used to do, I just gave you a big hint.

If anybody’s wondering where most people are growing to be working in the future, i just gave you a big hint.

If anybody’s completely confident we will have rapid productivity growth in the future, they should be giving pause–because no matter how much productivity we have in agriculture or illumination, it doesn’t really matter for the aggregate economy. Increasingly, that’s becoming true of a larger and larger fraction of what it is that we produce.

…  in the 1960s,= ,,,  about 6% of the men in the United States between the age of 25 and 54 were not working. Today, 16% of the men in the United States between the age of 25 and 54 are not working. It won’t be very different even when the economy is at full employment.

Something very serious has happened with respect to the general availability of quality jobs in our society.

… Whether you think it is due to technology or to globalization or to the maldistribution of political power, something very serious is happening in our society.

The second is by Nick Bunker …

What to worry about on the supply side - Washington Center for Equitable Growth

…  A new paper by economists Stephen G. Cecchetti of Brandeis International Business School and Enisse Kharroubi of the Bank of International Settlements argues that an over-bloated financial sector can reduce productivity. They contend that by drawing talented workers toward Wall Street, the finance sector lowers the total productivity rate….

From Summers we see that certain technologies have dramatically diminishing returns, so that they become a smaller part of a larger whole. Obvious, now that he’s pointed this out. There is only so much light that we can use. Is this also true of computing power? Is it true of energy?

Is Summers saying all employment will shift to expensive and inefficient health care and education? Isn’t that what Baumol said?

It’s a good exercise to consider how computational processing could follow the path of the lightbulb. There is, for me, no significant difference between a response time of milliseconds and picoseconds. Between modern processors and SSDs there seems no pressing need desktop performance increases. To some extent the human users is the rate limiting step. Only when one eliminates the human user does a millisecond vs. picosecond delay matter, as with high frequency stock “trading” (manipulation) — or the timescales of an AI.

Thinking of high frequency trading, we are reminded that vast amounts of modern economic activity transfer wealth without producing product. They have low to negative productivity, as found by Cecchetti and Kharroubi. Some of these are parasitic processes as would arise from any complex adaptive system, others are forms of more or less transparent fraud rooted in complexity exploitation. In our times information technology has been an essential enabler of both.

Considering failures of productivity enhancement, what do we make of Google Search? Ten years ago Google Search was miraculous, now it increasingly fails to produce much of value [2]. The web grew very quickly on an advertising based business model, but that model has failed and a new model is unborn. Progress is unpredictable in whitewater times.

Or consider email. We’ve been using it widely for almost 30 years, yet very few people use email well. Much time in routine corporate life is wasted by incompetent email [3]. Alas, email’s failures can’t compare to the disappointment of the “electronic health record” or “EHR”

Ahh, the EHR! What dreams we had in the 1980s. Dreams that took me from rural practice to another degree to a career in healthcare IT. It was so obvious how patients would benefit, and how all providers would become far more productive. 

The reality of the EHR has been a crushing disappointment. One day, perhaps, the dreams will come true — but nobody in 1990 would consider the state of clinical automation in 2015 anything but an appalling failure. A failure not of technology, but of business incentives, of markets, and of complex interlocking rigidities.

The list goes on. The same technology that enables location-based alerts also enables malware and adware.  Our economic landscape has been transformed; new technology causes vast wealth creation, but then wealth concentration drives the greater economy to a stagnant deflationary spiral.

Perhaps we’ve been here before. It took 60 years after the 1780 “start” of the industrial revolution for worker living standards to definitively rise. If our revolution started 70 years ago, maybe the rise will start any time now.

Or perhaps we’re headed in a different direction. An Economy is not a system for satisfying humans, or a system for producing goods or wealth or jobs. The “Complex Adaptive System” cliche truly applies. It is an immaterial ecosystem that produces things like wealth and jobs, but also emergent amoebacorp and brain sucking jobs in finance. The Economy is a beast of its own, slouching towards Bethlehem.

- fn -

[1] The PDF includes two killer graphs …

and

 

[2] While writing this post I often searched for prior posts in notes.kateva.org. Google did a poor job, Duck Duck Go constrained to “site:kateva.org” did much better.

[3] If you ever hear of a corporation that teaches employees to write effective email please let me know. I’d like to buy shares.

Related

• Global finance and parasites 9/2009
• Secular stagnation and the Beveridge curve - the role of frail boomer parents 6/2014
• Speculation: The corporate ecosystem and American stasis: corporations are players independent of their owners and managers, and they have changed our financial ecosystem the same way algae change a pond (Amaebocorp) 11/2010.
• The morality of markets - and a response to hunger 9/2010
• Baumol’s cost disease: medicine, education and post-AI disruption 10/2012
• Fraud, IT, Economics and the Depression: Galbraith is most impolite 8/2011
• Finance 2.0, Oil and Project Syndicate - entertainment 2012! 12/2011
• Fraud on Cyber: An annotated sample of Gordon’s Notes 8/2011
• Causes of the Great Recession: China, GPSII and RCIIIT. Now for Act III. 4/2010
• 21st century deception and the evolution of the emergent mind 6/2007
• The IQ of an ecosystem and other questions of emergence 5/2007 

Canopy Economics and Eco-Econ

I wrote my Canopy Economics post in 2004, and “eco-econ” in 2014 (see also). I haven’t seen these concepts filter into the mainstream, though wage stickiness in macroeconomics probably comes close. One day… (As much as Google’s zombified Blogger allows I’ve walked back and tagged old Canopy Econ posts as eco-econ)

Dynamic stability: struggle and balance in minds, brains, genomes, pregnancy, politics, ecosystems and economies

The minds we experience are based on multiple overlapping, redundant and competitive brain systems (I don’t get the term “degeneracy” btw) that can survive injury and genome bugs. Genome expression works the same way, which is why we’ve made so little progress with genomic medicine since 1994.

Human pregnancy works the same way — a dynamic struggle (war), a kind of tension control system.

American politics too — something to remember amidst the yammering and yelling and general madness - a reason for optimism.

So do ecosystems of course; and thus eco-econ says so do economies.

This is something we probably ought to think about a bit more.

Human pregnancy is a dynamic struggle - implications for eco-econ, corporate power and secular stagnation

At the “Spherical Cow” level of simplification, human pregnancy is a dynamic tension control system, a kind of brain and gene motivated cold war between fetus and host (emphases mine)

Pregnancy is a war between mother and child – Suzanne Sadedin – Aeon

As the pregnancy continues, the foetus escalates its hormone production, sending signals designed to increase the mother’s blood sugar and blood pressure and thus its own resource supply. In particular, the foetus increases its production of a hormone that prompts the mother’s brain to release cortisol, the primary stress hormone. Cortisol suppresses her immune system, stopping it from attacking the foetus. More importantly, it increases her blood pressure, so that more blood pumps past the placenta and consequently more nutrients are available to the foetus.

The mother … pre-emptively reduces her blood sugar levels. She also releases a protein that binds to the foetal hormone, rendering it ineffective. So then the foetus further increases its production. By eight months, the foetus spends an estimated 25 per cent of its daily protein intake on manufacturing these hormonal messages to its mother. And how does the mother reply? She increases her own hormonal production, countering the embryo’s hormones with her own that decrease her blood pressure and sugar. Through all this manipulation and mutual reprisal, most of the time the foetus ultimately gets about the right amount of blood, and about the right amount of sugar, allowing it to grow fat and healthy in time for birth.

Pre-eclampsia may represent a malfunction of these balancing factors — a malfunction that injures both fetus and mother (many wondered about this in the early 90s).

Eco-econ principles suggest we look for this kind of evolved dynamic tension in our economic and political systems. We might look at something like this…

a three way struggle between powerful economic (voters are also customers) and political forces. 

By analogy our current situation of secular stagnation and extreme wealth concentration is the equivalent of pre-eclampsia — a dynamic control system disorder that ultimately injures even the dominant powers. Corporations  and powerful individuals have accumulated too much wealth and power, resulting in dysfunctional patent laws, increasingly oppressive non-compete contracts, and a corrupt political system.

We can either rebalance our control systems, or we can develop eclampsia.

Secular stagnation and the Beveridge curve - the role of frail boomer parents

American unemployment, as economist’s measure it, is back to our post-2000 “norm”. On the other hand economic growth is low; our last quarter would make a fine start to another recession. Krugman et al debate the cause of “secular stagnation” in general, and strangely low labor force participation and Beveridge Curve shift in particular.

The usual suspects are globalization and “IT” (increasingly “AI”, politely referred to as “robots”). I also suspect the dominance of the dysfunctionally powerful modern corporation plays an important role along with the related the rise of economic parasites.

Income inequality is inducing economic distortions that likely also contribute, though I think that effect is partly offset by corporate power. Slowdowns in scientific discovery and technological innovation aren’t helping.

That’s a long list - as one would expect in an eco-econ world where we have to treat economies as ecologies. It takes a lot to change a self-correcting system.

I think we can add more though - including the intersection of demographics and medicine.

Once upon a time, as “recently” (cough) as when I started medical school in 1982, parents died in their 60s and 70s. They weren’t as vigorous as today’s 70 yo’s but they weren’t particularly frail either. They ate poorly, smoked and exercised little — but that’s not enough to make someone frail. It just means that elders died relatively quickly of cancer, heart disease, and organ failure. Dementia was starting to become more common, but it wasn’t universal.

Today’s Boomer parents are different. They stopped smoking 20 or 30 years ago. They’ve had more education and they’ve benefitted from bypass surgery and far better medications for lipid and blood pressure control. Their diets are lousy and they never exercised much — but they’re not nearly as obese as we will be.

So they tend to last — into their 80s. Which is pretty much the end of the road for the human machine. So Boomer parents get to be frail - and demented. That’s an entirely different care burden than any previous generation has known - and it’s hitting the boomer peak of today’s demographic curve. As always, the burden falls largely on women.

The frailty burden is genuinely new. It’s not big enough to explain all of our economic transformation, but I think it plays a significant role.

Fortunately, there’s an obvious fix - and an investment opportunity.

I expect to see massive solar powered robotic dementia care facilities opening across the empty spaces of America — probably as extensions of Google’s data centers. With robotic caretakers, waste water recycling, soy lent green synthetic protein, and high bandwidth connections to companion AIs and VR-integrated remote children this should be quite pleasant.

I’m looking forward to my pod. (Oh, sh*t, I’m in it right no…..)

See also

• 1973 vs. 2013: Stagflation vs Stagbubbilation 11/2013
• Employment in the Great Stagnation 8/2010
• Salmon, Picketty, Corporate Persons, Eco-Econ, and why we shouldn’t worry 4/2014
• Ants, corporations and the great stagnation 12/2011
• Why did medical progress slow after 1984? 12/2010
• Mass disability goes mainstream: disequilibria and RCIIT 12/2011
• Secular stagnation: What if the current corporate environment were selecting for remarkably mediocre CEOs? 6/2014
• The standard human lifespan is 88 7/2010
• Why geezers hit the gym (warning - for mature audiences only) 3/2014 (I’m keeping my deadliest under 200 lbs for now, but should be able to break 200 on my back squat this August.)

[1] 

Salmon, Picketty, Corporate Persons, Eco-Econ, and why we shouldn't worry

I haven’t read Picketty’s Capital in the Twenty-First Century. I’ll skim it in the library some day, but I’m fine outsourcing that work to DeLong, Krugman and Noah.

I do have opinions of course! I’m good at having opinions.

I believe Picketty is fundamentally correct, and it’s good to see our focus shifting from income inequality to wealth inequality. I think there are many malign social and economic consequences of wealth accumulation, but the greatest threat is likely the damage to democracy. Alas, wealth concentration and corruption of government are self-reinforcing trends. It is wise to give the rich extra votes, lest they overthrow democracy entirely, but fatal to give them all the votes.

What I haven’t seen in the discussions so far is the understanding that the modern oligarch is not necessarily human. Corporations are persons too, and even the Kock Brothers are not quite as wealthy as APPL. Corporations and similar self-sustaining entities have an emergent will of their own; Voters, Corporations and Plutocrats contend for control of avowed democracies [1]. The Rise of the Machine is a pithy phrase for our RCIIT disrupted AI age, but the Corporate entity is a form of emergent machine too.

So when we think of wealth and income inequality, and the driving force of emergent process, we need to remember that while Russia’s oligarchs are (mostly vile) humans, ours are more mixed. That’s not necessarily a bad thing - GOOGL is a better master than David Koch. Consider, for example, the silencing of Felix Salmon:

Today is Felix's last day at Reuters. Here's the link to his mega-million word blog archive (start from the beginning, in March 2009, if you like). Because we're source-agnostic, you can also find some of his best stuff from the Reuters era at Wired, Slate, the Atlantic, News Genius, CJR, the NYT, and NY Mag. There's also Felix TV, his personal site, his Tumblr, his Medium archive, and, of course, the Twitter feed we all aspire to.

Once upon a time, a feudal Baron or Russian oligarch would have violently silenced an annoying critic like Salmon (example: Piketty - no exit). Today’s system simply found him a safe and silent home. I approve of this inhuman efficiency.

So what comes next? Salmon is right that our system of Human Plutocrats and emergent Corporate entities is more or less stable (think - stability of ancient Egypt). I think Krugman is wrong that establishment economics fully describes what’s happening [2]; we still need to develop eco-econ — which is not “ecological economics”. Eco-econ is the study of how economic systems recapitulate biological systems; and how economic parasites evolve and thrive [3]. Eco-econ will give us some ideas on how our current system may evolve.

In any event, I’m not entirely pessimistic. Complex adaptive systems have confounded my past predictions. Greece and the EU should have collapsed, but the center held [4]. In any case, there are bigger disruptions coming [5]. We won’t have to worry about Human plutocrats for very long….

See also

• Princeton Study: U.S. No Longer An Actual Democracy
• Justice Stevens Suggests Solution for ‘Giant Step in the Wrong Direction’
• Economist Receives Rock Star Treatment
• Transcending Complacency on Superintelligent Machines. Hawking, Russell, Tegmark and Wilczek
• The Piketty pessimist | Felix Salmon
• Frustrations of the Heterodox - Krugman

and from my stuff

• Ants, corporations and the great stagnation 12/2011
• Speculation: The corporate ecosystem and American stasis 11/2010
• Corporate growth and the unexpected triumph of central planning 11/2012
• The debt ceiling: Can Goldman Sachs win if the US defaults? 4/2011. 
• Mass disability goes mainstream: disequilibria and RCIIT 11/2011
• The limits of disaster predictions: complex adaptive systems 2/2007
• Fermi Paradox: The solution set is stable 3/2013
• Apologetics: God and the Fermi Paradox 11/2010 (Sort of related :-)
• Sympathy for Economists 8/2013
• The new history is deep history 4/2010. Democracy is but the blink of an eye.

- fn -

[1] I like that 2011 post and the graphic I did then. I’d put “plutocrats” in the upper right these days. The debt ceiling fight of 2011, showed that Corporations and Plutocrats could be smarter than Voters, and the rise of the Tea Party shows that Corporations can be smarter than Voters and Plutocrats. Corporations, and most Plutocrats, are more progressive on sexual orientation and tribal origin than Voters. Corporations have neither gender nor pigment, and they are all tribes of one.

I could write a separate post about why I can’t simply edit the above graphic, but even I find that tech failure too depressing to contemplate.

[2] I don’t think Krugman believes this himself - but he doesn’t yet know how to model his psychohistory framework. He’s still working on the robotics angle.

[3] I just made this up today, but I dimly recall reading that the basic premises of eco-econ have turned up in the literature many times since Darwin described natural selection in biological systems. These days, of course, we apply natural selection to the evolution of the multiverse. Applications to economics are relatively modest.

[4] Perhaps because Corporations and Plutocrats outweighed Voters again — probably better or for worse.

[5] Short version — we are now confident that life-compatible exoplanets are dirt common, so the combination of the Drake Equation (no, it’s not stupid) and the Fermi Paradox means that wandering/curious/communicative civilizations are short-lived. That implies we are short-lived, because we’re like that. The most likely thing to finish us off are our technological heirs.

Evolutionary economics is due for a reboot

Jupiter's red spot is a transient thing. One day the storm will dissipate -- though probably not in our lifetimes.

Life is a transient thing; a deviation from general entropy flows. One day life will go away.

NFL subsidies are a kind of emergent trap, one day they will go away.

Our universe, lives and economies are rife with transient exceptions. In the long run they go away, but we don't live in the long run. In our time frames the exceptions are the rules.

These exceptions don't appear in micro-economics, macro-economics, or even behavioral economics. Macro tells us average temperature, it doesn't describe the tornado bearing down on our house. 

So we need something radically new. Something like evo-Econ or eco-Econ or Canopy Economics; a discipline that focuses on self-organizing emergent phenomena, that recognizes that natural selection is inevitable in a complex adaptive system.

Did I put enough buzz words in there? Because I'm not dumb enough to think these are new ideas. Ecological economics is the application of economics to ecological topics, so not what I'm thinking of, but Thorsten Veblen coined the term Evolutionary Economics in 1898. Judging from the wikipedia article Evo-Econ has veered off in several different directions over the past 110 or so years -- but sometimes it tracks closely to what I'm describing here.

It's due for a renaissance today.

Michael Church's model of the corporate worker - a short critique

Michael Church makes me look like a corporate fan. In a recent post he focused on startup culture ...

Gervais / MacLeod 4: a world without Losers? | Michael O.Church

…. This is a continuation of last week’s analysis of various work cultures and the patterns of degeneracy. I’ve analyzed hierarchies that form in organizational cultures and the relationship between ascendancy and bad behavior (in particular, psychopathy).

… In these small, agile companies, does the MacLeod classification apply? Or has this dysfunctional and unfair arrangement been rendered obsolete? If so, then how? If not, then who are the Sociopaths, Clueless, and Losers? I’ll answer that. Today, I’m going to focus on the sociology of VC-istan, perhaps the first truly postmodern corporate body...

Short version -- he likes VC-istan even less than he likes conventional corporations. (Warning - he writes long form. Feel free to skip to the end.)

Church, and Gervais and MacLeod as well, model a corporation as made up of 3 groups of people (my preferred label is at the end)

• Sociopaths [4]: Power-seeking amoral individuals who care nothing for the fate of others. They rule. (Rulers)
• Losers: Balance-seeking moral individuals who know the rules of the game and work within them. (Workers)
• Clueless: Low to middle status individuals who believe they owe the corporation their loyalty and that it will protect them. (Faithful)

Church sometimes adds a fourth, the technocrat. This is a more or less good version of the sociopath, seeking power but also benefits for the masses and society.

The theory has a certain appeal. Even if it's not a perfect match for the corporations I've lived in for 19 years, it's a good match for the Cults I used to visit in the 80s. [1]. They invariably featured Clueless believers at the base, and Sociopaths at the top. That matches Church's description of VC-istan.

Corporations feel more complex though. I'm not sure I've ever met the "Sociopath" Church describes [3], and I've known some wealthy executives and entrepreneurs. The ruling class I've known is usually a mixture of Church's "technocrat" and "sociopath"; with more of the former than the latter. It is true that belief in the 'goodness' of the corporation is pretty rare in the executive class, but even there I've seen (naive) exceptions.

My biggest split from Church however is that he treats Corporations as the sum of their people.  I think the complex modern publicly traded corporation is an emergent entity in its own right - more than the sum of its people (see below). It's a mindless entity to be sure, but it wants to live and grow as intensely as the average ant colony. It resists Church's 'Doom of the Clueless' [5], even if It isn't aware that it's resisting.

That said, Church's model has the advantage of parsimony, and it does explain a lot about middle manager life.

 - fn -

[1] It was a hobby of my early years. Cults loved me for some reason, I must have looked like a great candidate then.

[2] Even if it's only contributing to the "health" of some abstract Good represented by a "functioning" market.

[3] Ok, maybe the people who make a living downsizing divisions or managing major purges. They are hard people.

[4] I think Church is wrong about the etymology of psychopath/sociopath btw. It all got horribly mangled when Americans and Brits used the same two words in precisely opposite ways.

[5] Which is a bit like this Technology Review article.

See also:

• The Economist: what makes a murderous zealot? 2005
• Visiting the first church of scientology and Hubbard's offices 10/2005
• Corporate growth and the unexpected triumph of central planning 11/2012
• Why do corporations (firms) exist? Beyond Coase's theory of the firm 10/2010
• The corporation as psychopath In which the corporation is the psychopath. 2004
• The origins of corporate mediocrity - promoting the best 2009
• Ants, corporations and the great stagnation 12/2011
• Self sustaining entities: corporations and the Spanish Inquisition 6/2006
• Rule 34 by Charlie Stross - my review Stross is not fan. 1/2012
• Speculation: The corporate ecosystem and American stasis 2010
• Emergent computation -- the thinking world (Nature) 1/2004

Corporate growth and the unexpected triumph of central planning

The American Economic Review tells us large corporations are taking up a larger share of our GDP ...

The American Economic Review, Vol. 21, No. 1, pp. 10-42

The Growth in the Relative Importance of the Large Corporation in American Economic Life

...  If recent rates of growth were to continue, 80 per cent of non-financial corporate wealth would be in the hands of 200 corporations by ...

... Six industries can boast of one or more "billion dollar" companies ...

Yeah, that said "billion", not "trillion". The article was published in March 1931, so it was presumably written after the crash of '29 but before the full horror of the Great Depression was recognized.

81 years later the Economist has an update:

Free exchange: Land of the corporate giants | The Economist 11/2012

... Businesses have also been getting bigger. A snapshot of the American economy shows huge dispersion in firm size: around a third of American workers are employed by one of the 6m small firms with fewer than 100 workers, and another third are employed by one of the 980 large firms that have over 10,000 workers. But the long-run trend seems to be towards bigger companies. In a 1978 paper Robert Lucas of the University of Chicago documented how average firm size in America had increased over a 70-year period (see left-hand chart)...

... In the past 15 years the assets of the top 50 American companies have risen from around 70% of American GDP to around 130% (see right-hand chart). All of the top ten American firms have been involved in at least one large merger or acquisition over the past 25 years...

...  If size does not keep driving down costs, why do big firms keep expanding? One possibility is that they are seeking to boost profits not by driving down costs but by raising prices. Buying up rivals softens competition and enables firms to charge more...

Accelerated consolidation seems like a predictable outcome of very low interest rates and very high risk aversion [1]; an unintended consequence of economic stimulus and at the zero lower bound. If so, it's a winner-take-all result in a political-economic tax, law and accounting environment fashioned by large corporations for large corporations.

Size can be used to purchase competitors, but it has many more non-market advantages. Size allows, for example, the capture of regulators and the purchase of legislators. Those advantages allow corporations to grow beyond the bounds of classic microeconomics.

And that,  surprisingly, is how we end up with the unexpected triumph of central planning. 

Central planning triumphs because, even if we ignore regulatory capture and senatorial acquisition, corporations are only capitalist on the outside of the cell membrane. Inside the corporation there are no contracts, no currencies, and no markets. Inside the corporation, we have the hallmarks of Soviet central planning - goals and quotas and commissars and imaginary numbers and dictates from the central commission.

Central planning, of course, has its issues. Persistent and eventually fatal issues. When very large corporations fail though, they take a lot of things down with them. If there are truly systemic dysfunctions associated with corporate size, and if large corporations now subsume a large portion of national economic activity, the impact of these weakened monsters may be considerable. 

See also:

• The Modern Firm - a review 4/2012
• Why do corporations (firms) exist? - Coase and the theory of the firm 10/2010
• Gordon's Notes: Global finance and parasites 9/2009
• The origins of corporate mediocrity - promoting the best 7/2009 - game theoretic limitations to corporate competence
• The Corporation - what next? 8/2010 - links to prior posts
• Troubled capitalism: The corporate entity 8/2010 - science fiction socialists attack
• Ants, corporations and the great stagnation 12/2011
• Speculation: The corporate ecosystem and American stasis 11/2010
• After the crash: The future of the publicly traded corporation 8/2008
• Self sustaining entities: corporations and the Spanish Inquisition 6/2006
• Malice, incompetence, and happy accidents 5/2011 - Classic Dilbert
• Kristof: The market failure of CEO Compensation 3/2004
• SBA.GOV document on small business recover (pdf) 1/2012

[1] Given the way American health care has worked, an aging population may also support increased corporate size.

Rule 34 by Charlie Stross - my review

I read Charlie Stross's Rule 34. Here's my 5 star Amazon review (slightly modified as I thought of a few more things):

Rule 34 is brilliant work.

If Stross had written a novel placed in 2010, it would have been a top notch crime and suspense novel. Charlie's portrayal of the criminal mind, from silence-of-the-lambs psychopath (sociopath in UK speak, though that US/UK distinction is blurring) to every day petty crook, is top notch.

Stross puts us into the minds of his villains, heroes, and fools, using a curious 2nd person pronoun style that has a surprising significance. I loved how so many of his villains felt they were players, while others knew they were pawns. Only the most insightful know they're a cog in the machine.

A cog in a corporate machine that is. Whether cop or criminal or other, whether gay or straight, everyone is a component of a corporation. Not the megacorp of Gibson and Blade Runner, but the ubiquitous corporate meme that we also live in. The corporate meme has metastasized. It is invisible, it is everywhere, and it makes use of all material. Minds of all kinds, from Aspergerish to sociopath, for better and for worse, find a home in this ecosystem. The language of today's sycophantic guides to business is mainstream here.

Stross manages the suspense and twists of the thriller, and explores emerging sociology as he goes. The man has clearly done his homework on the entangled worlds of spam and netporn -- and I'm looking forward to the interviewers who ask him what that research was like. In other works Stross has written about the spamularity, and in Rule 34 he lays it out. He should give some credit to the spambots that constantly attack his personal blog.

Rule 34 stands on its own as a thriller/crime/character novel, but it doesn't take place in 2010. It takes place sometime in the 2020-2030s (at one point in the novel Stross gives us a date but I can't remember it exactly). A lot of the best science fiction features fully imagined worlds, and this world is complete. He's hit every current day extrapolation I've ever thought of, and many more besides. From the macroeconomics of middle Asia, to honey pots with honey pots, to amplified 00s style investment scams to home foundries to spamfested networked worlds to a carbon-priced economy to mass disability to cyberfraud of the vulnerable to ubiquitous surveillance to the bursting of the higher education bubble, to exploding jurisprudence creating universal crime … Phew. There's a lot more besides. I should have been making a list as I read.

Yes, Rule 34 is definitely a "hard" science fiction novel -- though it's easy to skip over the mind-bending parts if you're not a genre fan. You can't, however, completely avoid Stross's explorations of the nature of consciousness, and his take on the "Singularity" (aka rapture of the nerds). It's not giving away too much to say there's no rapture here. As to whether this is a Rainbow's End pre-Singular world … well, you'll have to read the novel and make your own decision. I'm not sure I'd take Stross's opinion on where this world of his is going - at least not at face value.

Oh, and if you squint a certain way, you can see a sort-of Batman in there too. I think that was deliberate; someone needs to ask Charlie about that.

Great stuff, and a Hugo contender for sure.

If you've read my blog you know I'm fond of extrapolating to the near future. Walking down my blog's tag list I see I'm keen on the nature and evolution of the Corporation, mind and consciousness, economics, today's history, emergence, carbon taxes, fraud and "the weak", the Great Recession (Lesser Depression), alternative minds (I live with 2 non-neurotypicals), corruption, politics, governance, the higher eduction and the education  bubble, natural selection, identity, libertarianism (as a bad thing), memes, memory management, poverty (and mass disability), reputation management, schizophrenia and mental illness, security, technology, and the whitewater world. Not to mention the Singularity/Fermi Paradox (for me they're entangled -- I'm not a Happy Singularity sort of guy).

Well, Stross has, I dare to say, some of the same interests. Ok, so I'm not in much doubt of that. I read the guy religiously, and I'm sure I've reprocessed everything he's written. In Rule 34 he's hit all of these bases and more. Most impressively, if you're not looking for it, you could miss almost all of it. Stross weaves it in, just as he does a slow reveal of the nature of his characters, including the nature of the character you don't know about until the end.

Update: In one of those weird synchronicity things, Stross has his 2032 and 2092 predictions out this morning. Read 'em.

Ants, corporations and the great stagnation

Do the great stagnation failures of the research enterprise and the modern publicly traded corporation have the same roots? Are not both ant-colony-like adaptive entities with emergent agendas of "their" own? An agenda to grow and survive regardless of the interests of their individual members or of their economic and human ecosystems?

See also

• Emergent computation -- the thinking world (Nature) 1/2004
• Malice, incompetence, and happy accidents 5/2011
• Why do corporations (firms) exist? 10/2010
• Speculation: The corporate ecosystem and American stasis 11/2010
• Why did medical progress slow after 1984? 12/2010
• Unemployment and the great stagnation 1/2011

PS. Extra credit speculation. Could these longterm trends be an independent contributor to the lesser depression? Independent of the macroeconomic disequilibria of disruptive globalization and IT innovation?

Separated at birth: alternative medicine and climate change denial

As a colleague and I corresponded about my support for the scientific consensus on CO2 driven climate change, I realized I was replaying fifteen year old conversations about the alternatives to science-based medicine. Homeopathy consumers have a lot in common with cosmic ray climate enthusiasts.

One common thread is a skepticism about the value science, and particularly the value of the scientific establishment.

Some believe that science simply doesn't apply. "Healing fields", they say, cannot be detected by science; indeed scientific analysis may destroy them. Herbal remedies are safe because Nature loves us. Yahweh promised us the Earth, so it's impossible for us to render it (transiently) inhospitable.

This version of anti-science is uninteresting. These arguments can't be refuted for the same reasons that we can't disprove the existence of unicorns and leprechauns.  There's no measure for resolving disagreements; these are theological disputes.

Another form of argument grants that the scientific method is effective, but claims that the scientific establishment is corrupt and untrustworthy. This is more interesting because it's at least partly true. Over the past twenty years we've learned about the effects of publication bias, particularly when corporations with strong financial interests (ex: Pharma) control the publication of research results. We've seen some spectacular scientific frauds, and we've seen a trend to "me too" research that gets safe grants but produces small results. During the Bush years, we saw loyalists suppress scientific results their bosses disliked.

Alas, there's no evidence the amateurs are reliable; most seem driven by the same passions that power crank cosmologists. Even if they were angels, furthermore, by their nature these amateurs bypass scientific evaluation and challenge. They cannot be judged because they're not in the game.

Sure, the scientific program is imperfect, but, when it comes to understanding the world, there are no alternatives. The process of iterating on internally consistent models that make testable predictions, and revising those models when predictions fail, has transformed human history. It is the only guide we have to developing better medicines, understanding the universe, or predicting the consequences of CO2 accumulation.

The denialists do have a point, even if they don't fully recognize it. We can and should improve the machinery of science. Requirements to publish data obtained through public investments, registries of studies to ensure negative and unfavorable results are published,  and (more challenging) reforms to grant programs and academic tenure are some of the improvements seen over the past decade.

Science tells us Homeopathy's effects are mediated by belief, not molecules. Science tells us that CO2 accumulation will change the earth's climate; and that these changes will be extremely disruptive for a crowded planet with fixed borders.

Maybe in ten years science will tell us that solar cycles are more important for our 21st century climate than CO2 accumulation. Maybe science will tell us that spinal manipulations do change the immune system. Maybe, but probably not.

Update 5/14/11: I've rewritten parts of the first few paragraphs.

The debt ceiling: Can Goldman Sachs win if the US defaults?

The GOP is expected to blackmail the Democratic party by holding the American economy hostage. This isn't news; Bruce Bartlett has been talking about the debt ceiling and debt default since last June, and has been expecting this crisis since January.

Even so, I haven't worried. It's not that I think the GOP is reasonable or even rational. The GOP is certainly crazy enough to blow up the village in order to save it. I haven't worried about this because I have assumed that the GOP will obey its masters on the big things  ...

Gordon's Notes: Is the GOP truly a pawn of corporations and the wealthy? We'll find out soon. (Jan 2011)

... Charlie Stross says emergent corporate entities control America. Krugman says wealth alone is sufficient explanation, emergent entities are an unnecessary complication.

John Gordon says control (the bouncing yellow ball) of America is a dynamic balance between the emergent corporate entity (ECE) powerful (wealthy) individuals, and the voting masses [1]:

Of course I'm right, but it would be nice to have evidence.

Fortunately, there's a natural experiment coming up. The GOP is threatening to destroy the American, and world, economy. This is in the interests of neither powerful individuals nor ECEs. So if it happens, then Stross, Krugman and I are all wrong. The Voters have power after all, and it's just too bad so many Americans are detached from reality...

Recently, however, I realized there was a flaw in my logic.

I assumed destroying America was not in the interest of American "Corporate Entities". That's not necessarily so. I expect there's a way to make vast amounts of money off a US debt default, particularly for a company that has "insider" information. If Goldman Sachs were to bet on default, then they could combine with GOP whackiness to finish us all off.

Now I'm worried.

Is the GOP truly a pawn of corporations and the wealthy? We'll find out soon.

Charlie Stross says emergent corporate entities control America. Krugman says wealth alone is sufficient explanation, emergent entities are an unnecessary complication.

John Gordon says control (the bouncing yellow ball) of America is a dynamic balance between the emergent corporate entity (ECE) powerful (wealthy) individuals, and the voting masses [1]:

Of course I'm right, but it would be nice to have evidence.

Fortunately, there's a natural experiment coming up. The GOP is threatening to destroy the American, and world, economy. This is in the interests of neither powerful individuals nor ECEs. So if it happens, then Stross, Krugman and I are all wrong. The Voters have power after all, and it's just too bad so many Americans are detached from reality.

I bet, however, that the Tea Party GOP caves, and the GOP that serves the powerful and the corporate wins.

That doesn't tell us whether Stross, Krugman, or me has the best story though. We need a different falsifiable prediction.

It's tough to come up with that test because this is a triangle of frenemies, not enemies. Often the interests of (hypothetical) ECEs align with those of powerful people and/or Voters (who are both consumers and employees).  We need test where the voters are neutral, but the interests of corporate entities and powerful individuals are opposed.

The only test I've come up with so far would be to examine the pattern of legislation over the past 30 years. My hypothesis is that we'd find that legislation and accounting regulations have furthered the development of ECEs even as they've reduced the rate of return to Powerful individuals -- perhaps shrinking that pool [2] and even reducing overall economic growth.

Can anyone think of another falsifiable test?

[1] Similar picture here, but there the third point was "the weak". Also true, but different point.
[2] So we end up with fewer "players", even though they may be individually wealthier.

See also:

• Speculation: The corporate ecosystem and American stasis
• Understanding the elections - what's really changed
• America 2011: exploring the boundaries of democracy and capitalism

Speculation: The corporate ecosystem and American stasis

To speculate is to "form a theory or conjecture about a subject without firm evidence" [1]. My speculation tagged posts are things I suspect are true - even though I know I lack evidence. This is one of them.

For some years [2] I have been playing with a speculation that large publicly traded corporations [1], independent of their managers, are self-sustaining super-organisms of commerce-space that, like biological organisms, can change their (legal, regulatory and cultural ecosystem) to their peculiar tastes. I call this entity AmoebaCorp; I imagine it oozing and absorbing in an abstract "space" where individual humans are invisible atoms.

Over the last two hundred years of American history corporate power and influence has waxed and waned. Within the past year the corporate entity reversed a small transient setback and completed a dramatic transformation of its political ecosystem. The power of AmoebaCorp is higher than average, perhaps as high as it has ever been. The power of individuals, both the few that are strong and the many that are weak, has been commensurately reduced.

I wonder what that means for us. Corporations, after all, are not (yet) enemies of individual humans. They need us the way software needs hardware and memes need brains. They certainly need the rule of law; most AmoebaCorp hate war [3]. We individuals, CEOs and peons alike, are frenemies of AmoebaCorp .

On the other hand, I don't think AmoebaCorp can get its mind around what we need to do for global climate change. Its timescape is even shorter than ours. With CT2 (Carbon Tax and Tariff) AmoebaCorp would be our friend, without CT2 it will be our enemy.

In the near term, I fear that AmoebaCorp is and will be an enemy of true invention, and without invention and innovation humanity will be in a world of hurt. AmoebaCorp cannot like disruptive technology, it may be happiest in the periods of stasis common in human history. I think we may be seeing the effects of that stasis in the IP (patent troll) wars, and in the recent history of small startup companies ...

I, Cringely » Blog Archive » No Life Insurance for Bull Riders - Cringely on technology

... Exchange Traded Funds are forcing more and more good tech companies to abandon the idea of ever going public. We saw this trend on this summer’s Startup Tour where not one of more than 30 companies we visited saw an Initial Public Offering (IPO) in its future. Every company saw itself eventually being acquired. But there’s a problem with being acquired, which is that it greatly limits the upside for entrepreneurs...

Cringely misses the point. There's a bigger problem here that fewer billionaires. The problem is that the innovations of those startups will die. They are often acquired to prevent disruption, rather than to enable disruption.

Stasis isn't the worst thing in human history, but we live in a world of 8 billion people. We are exhausting that world. Stasis is not a desirable option. The AmoebaCorp may now be more enemy than friend.

[1] Oxford American Dictionary.

See also:

• Why do companies exist? (10/2/1010 - many links to past posts)
• The Corporation - what next? (8/22/2010)
• Understanding the elections - what's really changed (11/4/2010)
• Slouching towards Skynet (12/9/2007)
• Self sustaining entities: corporations and the Spanish Inquisition (6/2006)

[1] Private, and effectively private, corporations like 2010 Apple and 1893 J.P. Morgan and Company are much more idiosyncratic. [2] Charles Stross has been well ahead of me on this. Marx, of course, had similar intuitions, which did not lend themselves to good history. [3] Some companies sell weapons or invest in security theater of course, so it's a bit of a mixed bag.

Update 12/1/10: The next step.

Natural selection and executive compensation

Imagine a world of sterile herbivores.

No predators, no reproduction.

Some are better at running, some are better at calculus, and some are better at gathering food.

Now imagine we rank the herbivores by food gathering capacity and call the top herbivore the CEO.

In the curious ecosystem of modern capitalism, do we select for executives who's primary skill is the ability to gather money to themselves?

Ok, it sounds silly, but wait a minute.

We usually define the CEO by their alleged job function -- that is, to lead, etc. They need to get the most money because ... well, they're the ... you know ... the alpha.

What if we have it backwards?

What if the primary skill of the modern CEO is "money gathering" -- the ability to, by various means, gather the most money to themselves? Since we organize corporate income distribution by corporate hierarchy, what if it's primarily the money gathering skill of an individual that determines their corporate stature?

In this case, the best "money gatherer" would, almost be definition, become the CEO.

Trust me, there's something here.

Of course it's not that simple. "Money gathering" is a complex skill, and it's associated with other skills that are relevant to the role of "leadership". On the other hand, it's also associated with traits that are perhaps not so good for leadership, judgment and direction.

Natural selection, remember, isn't about being handsome, smart, or fast. It's the statistical process of finding a local minima. In the peculiar world of modern capitalism, and given the rule that the CEO makes the most money, it may also be true that the person who makes the most money is the CEO.

So maybe we do "select", above all, for money gathering capacity -- much to the detriment of other skills.

That would explain quite a bit, wouldn't it?

Update 2/11/09: A similar post of mine from 2004.

Canopy Economics

Google Search: "canopy economics"

---

I was thinking about economics the other day. I used to think of the economy in terms of plate tectonics. When the fundamentals change, when the plates move, the visible surface is transformed.

Nowadays though, the surface seems very persistent. Even when the ground shifts, processes, institutions, entities, persist. Zombie processes stagger on beyond their life expectancy. The economy seems to have a "mind of its own".

So now I think of economics in terms of the "canopy", the layer of the forest that lies above roots and trunks. In a tropical forest I believe the trunks can die, but the canopy -- suspended by interconnections, can be relatively undisturbed.

Call this "Canopy Economics".

A google search found no matches on that phrase. Now there is one!

Update 9/11/06: Well, there are more hits on the Google search now -- but they're all 'splogs'! That is, computer generated web pages designed to trap search engines. I guess they harvested the concept from this page. Hmmm. What would be the neurologic and viral analog of that? DNA fragments, harvested and recombining, emergent systems ....

Update 11/24/07: The splog hits are gone now, and "canopy economics" returns two posts of mine and one post about forestry economics.