Technological Change And Social Inertia

Isn’t it interesting how people develop a sense of entitlement over things that, until only a few years ago, did not exist?

And isn’t even more curious that people will become defensive about protecting outmoded jobs they hate?

I read an article about NYC taxi and limo drivers seeking to ban the implementation of autonomous vehicles in NYC to protect their jobs. But how many taxi and limo drivers even like their jobs, or love them? Do these people wake up every morning, breathe deeply and say to themselves, “I am so grateful to get to drive people around again today!”

Technology marches on, and soon it will provide new things and new jobs for people to feel entitled about.

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Review – Zero to One

Zero to One: Notes on Startups, Or How to Build the Future

by Peter Thiel, published 2014

No wonder Peter Thiel is encouraging young people to avoid college and start companies– if the best lecture on startup entrepreneurship is Peter Thiel’s Stanford class-turned-book, it’s clear how vapid the value offering is in the average college course.

Thiel encourages the reader to build companies that make the world a better place on a principled basis, and he strongly advises to avoid competitive markets. And while he says that the book is not and can not be a how-to book for starting a company but rather a set of guidelines for how to think about what it takes to succeed as a startup, the book’s content doesn’t appear revelatory for any but the most amateur business mind. Maybe it would shock some people to learn they have to have a plan for selling their product, not just designing it, but if that’s the level you’re at (or that’s the “truth” you’re wedded to), is Peter Thiel’s book really going to be the bridge between your idea and massive success? Or any success?

It reads much more as a personal journal, reflecting on funny stories and anecdotes about Thiel’s own success with PayPal, than it seems to be a guide to entrepreneurship principles. Most of the “rules” are validated by some quirky thing that happened to Thiel and his mafia, for example, deciding not to invest in green energy companies because their CEOs were too well dressed and everyone knows real tech people wear tshirts and jeans. Huh?

It is also more useful as a descriptive work that explains entrepreneurship phenomena witnessed after the fact, rather than anything with a predictive quality to it. In other words, few entrepreneurship success stories will have failed to check the various boxes Thiel covers, but it’s also likely that many failures will have checked them, too. The book provides more insights into questions such as, “Why did Company X manage to grow so rapidly in Market Y?” rather than answering such questions as “How can Company X grow rapidly in Market Y?”

I was much more impressed by Thiel’s short speech pre-election to the National Press Club, outlining his reasons for supporting Donald Trump:

You can disagree with his reasons and his choice, but there is clearly a set of principles he believes in and an overall framework for understanding social issues that guided him to throw in his lot with Trump. That’s more educational than this book, unfortunately.

Review – Invisible Wealth

Invisible Wealth: The Hidden Story of How Markets Work

by Arnold Kling, Nick Schulz, published 2011

Recently I found myself rooting around the in archives of sites like Let A Thousand Nations Bloom and Distributed Republic and I selected a few recommended titles about the frontier of economics, politics and soft institutions (culture, legal norms, etc.) looking for answers to these questions mentioned in an earlier post:

  • Why do political borders and different legal systems seem to have such disparate impacts on economic development?
  • Which follows which, the culture/political system or the economy?
  • How sound is the idea of “competition amongst governments” and why don’t we see more countries’ policies moving toward a “developed” mean?

Invisible Wealth proved helpful in thinking more deeply about the first two questions, but it really didn’t offer any insights on the third question. The book is a mixture of introductory lessons on concepts from “Economics 2.0” intermixed with interviews from numerous academic economists who have done research in the field of the interplay between economic development and social institutions. The strongest parts of the book are the interviews with the economists. The introductory lessons suffer from too many mixed metaphors (hardware/software layer, Malthusian meadow/food court, innovation as the heart of the economy) and the insistence on delineating economic ideas as part of 1.0 or 2.0 thinking seems contrived and forced, not only because there is no existing group of economic thinkers who so identify themselves as adhering to one system of ideas or the other, but also because there is an entire school of thought, the Austrian school of economics, which recognized the importance of both 1.0 and 2.0 concepts and successfully integrated them decades ago, but which gets no spotlight aside from the consistent mentions amongst the interviews of the importance of the work of FA Hayek as an exemplar.

Briefly, Economics 1.0 is supposedly Classical Economics, which sees all economic issues in terms of the three basic inputs of land (original, unprocessed resources), labor (the effort and ingenuity of human beings interacting with those resources) and capital (the factors of production generated by mixing land and labor for future production). E1.0 is obsessed with equilibrium and static economic models, which are amenable to mathematical and statistical analysis. In contrast, Economics 2.0 acknowledges the important role of entrepreneurs in managing change and dynamism in the economy. Sadly, the authors neglect the ultra-important dimension of TIME and the role this plays in production and the coordinating activities of entrepreneurs… which is why the Austrian school again seems incredibly advanced compared to this offering and might be categorized as Economics 3.0. But even ignoring time, E2.0 is a big advance on E1.0 in acknowledging change as not only a real phenomenon of economic systems that is neglected by E1.0, but also the central element of economic development and growth. For development to take place, change must occur, and for change to occur, there must be actors with an interest and incentive in causing the change.

This shifts the analysis from studying the mineral resources or accumulated capital of a community, to studying the existence and behavior of entrepreneurs as innovators improving economic outcomes for everyone. The question begged then is, “Why do some economies have a lot of entrepreneurs, or very talented ones, while others have none or poor ones (or corrupt ones who get wealthy making people worse off)?” And for an answer to that question, one must explore the role of institutions.

With institutions, whether we’re talking E2.0 or E3.0, it’s clear that the science is still developing on which institutions are important for development, what role they play and how they can be successfully built (a significant meta-problem, because often there is feedback between a poor economy and difficulty building strong institutions and so on). There are also so many potential institutions to consider that the analysis can quickly get complicated, for example:

  • Property rights (how to define, how to enforce, what can/can’t be owned and by whom)
  • Legal norms (ie, tendency to rule a certain way in a certain type of case)
  • Legislation (ie, “the law” that will be enforced, including civil, criminal and regulatory policies)
  • “Culture” (accepted behaviors, social expectations, traditions, ideals, even aesthetics)
  • History (this is an odd one because it is so intangible and uncontrollable, but the history that each community comes from has a real effect on shaping other institutions and thus economic outcomes)
  • IQ (more on summary findings from Hive Mind below)
  • Religion
  • The family

I think this is why the interview portions of the book really shine. It is here that we get a lot of competing theories of development and which institutional factors are most important and why. They not only highlight how unsettled this part of economic or social science is, but also they provide outstanding examples of how critical each of these factors can be. And there is a clear distribution of insight and intelligence demonstrated by these interviews as well– while almost all of the interviewees have earned numerous awards and accolades, including Noble Prizes, for their economic work, several stand out as innovative giants while others seem to trade in the same, tired old statist fallacies of yore. What follows are some of the quotes I thought were most fascinating.

Robert Fogel

RF emphasized the role of technology in development, because as he says, “technological advance is the basis for all economic growth.”

One measure of economic development he suggested was looking at life expectancy. A rising life expectancy implies that people are able to produce sufficient resources to protect themselves from basic environmental and health risks. However, in looking at the historical data, there is an interesting trend in early industrial European societies by which rural populations maintained higher life expectancies than urban dwellers until around the turn of the 20th century. He blamed this on changes in technology, because

when you walked around in New York City, you were breathing pulverized horse manure, a much worse pollutant than the exhaust of automobiles

That idea grabbed me, both because it is vivid and disgusting, but also because it highlights that economic development is fraught with risk and even though the “ultimate” destination of economic development might be a less toxic technology like automobiles, the “path” along the way might include way points with more toxic technology (pathogen-laden pulverized horse manure) which is worse for health outcomes than taking your chances with subsistence-level existence in the countryside. A question I had which wasn’t explored in the discussion is why a.) city municipal services failed to keep the volumes of horse manure out of the streets as part of a sanitation program or b.) why market entrepreneurs didn’t collect and sell this “fertilizer” back to the countryside? It could be a technological problem within a technological problem.

Fogel also emphasized that the rate of technological change appears to be increasing in industrial economies:

it took four thousand years to go from the invention of the plow to figuring out how to hitch a plow up to a horse… it took 65 years to go from the first flight in a heavier-than-air machine to landing a man on the moon

Now, the example is cherry-picked and there are probably still a lot of technologies we’re using that are 10,000 years old (for example, if we ever primarily grow crops indoors, one could say “It took us 10,000 years to go from growing crops outdoors, to figuring out how to grow them indoors”, which seems like a really long time to figure out what will at that point be a best practice idea) but it still has impact.

He also mentioned the importance of economic development for the well-being of the aged:

you need to have a successful and rapidly growing economy in order for standards of living for the elderly to improve

I think this is true because the savings of the elderly need to earn an increasing return in real terms for their standard of living to improve without being forced to consume their capital, which puts a fixed timeline on their survival once they run out of capital entirely. And the only way their savings can earn a greater real return over time is if the entire economic pie is growing. It’s an interesting example of the connection between economic growth and and humane conditions.

Robert Solow

RS highlighted the complexity of the problem of solving poverty in poor countries:

Without appropriate institutional infrastructure, without the right local incentives, without complementary human capital, aid and investment will be wasted… poor countries are not only poor in capital, they are poor in the factors that make for “total factor productivity”

This is a direct application of E2.0 thinking contrasted with E1.0 thinking. The E1.0 aid crowd believes that if you just redistribute enough of the world’s wealth to the poor countries, they’ll be able to escape poverty. But RS emphasizes that they’re not just poor in terms of resources but also in terms of institutions which allow them to manage and develop resources. If this is true (and I think it is), it certainly gives one pause before hitting the “Donate to Charity”-button.

Paul Romer

PR focused on changes in technological systems and the economic impact that comes from replacing an old technology with a new one:

We didn’t get that much more light by producing hundreds of thousands of candles per person, but by switching from candles to gas

He also discussed the way technological development may improve our capacity to make further discoveries,

it may be inherent in the process of discovery that the more we learn the faster we can learn

and the impact that improvements in institutional technology have allowed us to harness those discoveries with greater efficiency:

the modern university and research system was designed not to create property rights but to lead to the rapid dispersal of new information; academics were rewarded based on the priority with which they disclosed information, so that the first person to disclose gets all the professional credit for discovering something new

[…]

what we’ve done is created better institutions over time, so that we now exploit the opportunities for discovery much more effectively than we used to

The most important insight from his interview was that growth requires change, and change creates “winners” and “losers”, and it’s easy for the losers to become a special interest group and lobby the government to arrest the change:

everyone wants growth but nobody wants change, and you’ve got to have both or you’ve got to have neither… change accompanies growth… when you have change, there will inevitably be winners and losers… we can’t let a small group of losers — either absolute losers or relative losers — stop the process of growth that will benefit most people going forward

Incidentally, this is why countries pursuing socialist policies stagnate. Socialism is a policy that preserves the status quo and tries to equalize outcomes that are created by change. Inevitably, equalizing outcomes ends up stopping the change itself and thus stagnation sets in.

Joel Mokyr

JM was actually one of my favorite interviews, so I will quote him extensively.

First, he talked about the reasons why humanity has gotten increasingly technologically advanced over time:

inventions are made when there is a minimum epistemic base… you cannot build a nuclear reactor by accident… but you can invent aspirin quite serendipitously, without having the faintest clue about how it works

[…]

We invent something, and sometimes we know a little bit about how it works, sometimes we know nothing, sometimes we know quite a bit, but in all cases, as we use it more, the epistemic base gets wider.

This technological advancement requires time, and a bit of luck, because

the only way we can think about technology is in evolutionary terms… a kind of science that makes no predictions

That’s also a really interesting idea because some economists have claimed that “science is prediction” and thus any economics which does not concern itself with empiricism and making valid predictions is not scientific. But here we have two examples (evolution, and technology) of sciences where prediction is not possible. Does that mean they are not scientific?

Later, JM goes into an explanation of the way changing technology led to economic development, and the way economic development impacted institutions and social ideas, and then the way this fed back into attempts to limit technological development and, by extension, economic development:

If you look at Europe in 1650 or 1700, what you see is a very sophisticated set of economies. They have just basically finished exploring the rest of the world, and there has been great deal of commerce and trade — joint stock companies are emerging, insurance is emerging. This is a fairly sophisticated commercial economy. The problem is, there are lots of special interests trying to get exclusionary arrangements that are good for them but bad for the economy. This is a system in which property rights are well defined and enforced, as Douglass North loves to say, but also rather distortive in the sense that you have lots of exclusionary arrangements. In other words, for the economy to function well, you don’t just need good property rights, you also need what we could call, somewhat vaguely, “economic freedoms.” You need labor mobility; you need to get rid of guilds; you need to get rid of monopolies, both local and global; you need to get rid of all kind of regulations; and above all, you need free trade. And if you don’t have that, you’re going to end up in a society that will not be able to grow.

Nowadays we have a different term for this. We call it corruption. We always say, look at countries like Russia or the Central Asian nations — these countries will never have good economies because they are corrupt. But corruption is really just a special form of what we call, in economic jargon, “rent-seeking.” I argue in my book that one of the things that happens in eighteenth-century Europe is a reaction against what we today would call rent-seeking, and that this, to a great extent, is what the Enlightenment was all about. The Enlightenment wasn’t just about freedom of religion and democracy. It wasn’t to be about democracy at all, but never mind that. It was about freedom of religion, tolerance, human rights– it was about all of those things. But it was also a reaction against mercantilism, and you find that attitude in certain people who were very important in the Enlightenment. Above all, of course, the great Adam Smith.

[…]

when you look at the few places in Europe where the Enlightenment either didn’t penetrate or was fought back by existing interests, those are exactly the countries that failed economically [Spain, Russia]

This is definitely a different take on the Enlightenment than I have come across before, but it makes a lot of sense to me and seems to do a good job of integrating economic, technological and political phenomena of the time period!

nobody has held technological leadership for a very long time… technology creates vested interests, and these vested interests have a stake in trying to stop new technologies from kicking them out in the same way that they kicked out the previous generation

That is the feedback loop mentioned earlier, and why the Enlightenment might have been a reaction against a vested interest reaction.

Cardwell’s Law: the more open the world is, the more free trade, the more ideas and people can move from one country to another, the less likely it is that technological progress will come to an end

This idea gives hope that there is a case for rational optimism assuming liberal social institutions around the world.

if you change the institutions but don’t change the culture, you’re not going to change the institutions

[…]

the degree to which we hold fast to the wisdom of earlier generations is an incredibly important element in how innovative a society is, because if you think about it, every act of invention is an act of rebellion

This suggests that “conservativism” as a social policy might lead to stunted economic development, depending upon when marks the beginning of what traditions and systems one is trying to conserve. It also highlights the problem that RS mentioned, namely, that there is complex interactivity between social institutions which enable economic growth and it’s possible that a “backwards” culture could interfere with or limit the effectiveness of “progressive” social institutions as a whole, so it’s not as simple as, say, invading a country and giving them a modern political constitution (ignoring the obviously negative social impact of a war!)

And this might seem like a throwaway quote, but I thought it was interesting:

Over most of history people have not voted their pocketbooks — Marxists included.

Thankfully! Because if they did, or do, then it will be truly hopeless to expect any kind of reform ideology to take place in the face of billions of people who could “vote their pocketbook” and keep instituting handout systems that impoverish everyone.

William Easterly

WE focused on the appropriateness of specific institutions to solving specific problems, namely, the planner-mentality to solving poverty. He looks at poverty as a circumstance created by a lack of innovation, and he identifies planning as a practice which is antithetical to innovation. Thus, planning can not solve poverty:

Planners think that the end of poverty requires a comprehensive, administrative solution. They’re trying to do something that’s a lot like central planning in the old, Soviet-style economies, in the context of poverty reduction.

[…]

It’s as if central planning has been totally, mercifully extinguished everywhere else except [in the areas with] the world’s desperate, poorest people, who can least afford such a dysfunctional solution to their problems — [areas] where it would be much better to imitate the mentality of free markets, which are all about giving financial incentives and motivating people to meet consumer needs.

[…]

corporate planning is just about scaling up a solution after you find something that works… you can’t use planning to find what works

William Lewis

WL, like JM, emphasizes the way that institutions can be used to enable and unleash innovative forces, or to restrict and restrain them. He also talks about attitudes of people in the industrialized West who are trying to create panacea solutions for people in poor countries:

Just because people are not educated does not mean that they are incapable, which is a mistake educated people in the West often make.

He points out that if the opposite were true, poverty would be a necessary part of the social landscape for much of the world for at least the next 50 years while several generations of people are being educated. But this wasn’t the pattern of development in the industrial countries before they obtained their industrial development and he doesn’t think it’s a good assumption for the remaining non-industrial countries as well.

No producer – no producer – has ever asked for more competition. So these domestic producers are really the secret enemies of globalization and they are exerting a lot of influence against it.

There’s that feedback loop! And it gives us an insight into the truth of protectionist policies, which don’t enable development but rather enable special interest groups to profit patriotically.

[Gordon] Wood showed that at the time of the Revolution, consumerism exploded in the United States. And consumerism was associated with fundamental notions of individual rights. Prior to that, at least in the feudal societies of Europe, consumption was viewed as a luxury to which only the land-owning class was entitled.

I’ve got a Gordon Wood book on my stack right now so I am excited to explore this idea further, this is another example of integrating economic and political ideas holistically and applying them to the analysis of a historical period to yield an interesting result.

And of course, the way you make a plan happen is by having a plan for production, not for consumption. There is no way you can plan or affect the individual choices that people make as individuals when they buy things, but you certainly can affect strongly what they have to buy through production planning. So this whole producer orientation was aided and abetted in modern times by the planning idea. It’s easy to see where the idea came from in feudal times– basically, the landowners and the people who owned the capital could control what happens. They were the only ones who had the ability to do anything. This whole battle for individual rights, for the political philosophies based on individual rights, and for what immediately comes from those political philosophies — namely, the idea of consumer rights — has expanded around the world to a relatively small degree.

Earlier I had mentioned [amazon text=Hive Mind&asin=0804785961]. Here are some “institutional” effects of High IQ societies, according to the author.

High IQ:

  1. Correlated with higher savings, which means more capital which raises the productivity of all labor
  2. Correlated with more cooperation, which means less corrupt government and more productive businesses
  3. Correlated with social market orientation, a form of social organization key to widespread prosperity
  4. Better at using “weakest link” team-based technology

So one challenging idea from Invisible Wealth and some of these interviews is that poor countries, in so far as they demonstrate low average IQs, as well, may have a more difficult time creating the institutional arrangements necessary to allow for sustained economic development. That has many ramifications for social policy if it’s true!

I noticed also that this idea about the importance of institutions is exactly what Hernando de Soto was discussing in his The Mystery of Capital, which I read last year. His approach was to emphasize property rights and formal versus informal economies. His argument was that poor countries tend to have major urban areas centered around the political capital where the elites in power and their cronies have the benefit of property rights enforcement and thus are able to build and accumulate capital, whereas the squatters and poor folk in the outlying communities not only have no property rights but are actively prevented from developing them or having them recognized by the formal legal system. The result is an estimate of trillions of dollars of capital “frozen” in informal structures which limit their exchangeability and thus their value, usefulness and ability to be improved or accumulated over time.

Review – Father, Son & Co.

Father, Son & Co.: My Life at IBM and Beyond

by Thomas Watson, Jr., published 1990

The son of IBM’s founder, Thomas Watson Jr.’s “Father, Son & Co.” is many things: a collection of folksy business wisdom passed down by his father, memories and recollections of his participation as an airman in World War II and later a US diplomatic career in the USSR, a story about the challenges of growing a global business, lessons in leadership and team building, the pitfalls of transforming an business organization from small scale to large scale and, most importantly, a personal reflection on the value of family. It was most interesting and entertaining for me to read when it dealt with business and some of the personal issues of the author in trying to prove himself in the shadow of a legendary father; I found it less enjoyable and less authentic when the author dabbled in politics or retold sappy anecdotes about popular political figures of his era with whom he had had personal relationships.

The Business of IBM

The axis around which the story revolves is not Tom Watson, Jr., and it’s not Tom Watson, Sr. It’s the company which Senior grew and transformed into IBM, and which Junior effected the change over to actual computing technology in the 1960s, that the book is really about. But because Junior’s and Senior’s personalities, families, fortunes and lives were so wrapped up in the affairs of IBM, it becomes about all of those things in turn as well. That is somewhat surprising because the book is ostensibly a memoir by Junior, yet the gravity of IBM is hard to ignore in nearly every chapter of the book.

When Senior joined on with the company as general manager and, shortly thereafter, president, IBM (then Computing-Tabulating-Record Company) was an important concern but not necessarily a large one. Senior had a vision for it and something of an indomitable will, and he had experienced enough success and failure on his own in other ventures that he had an idea of what it would take to create the vision he had for the company. He built a large, organized and polished sales force, instilled high morale and unity of purpose by creating training programs, achievement awards, national sales team conventions and even company songs that everyone had to sing. He also, like many strong-willed founders, created something of a cult of personality around himself, putting his picture up at IBM offices and facilities, writing memos that were distributed widely to all staff and constantly visiting field offices and manufacturing facilities and “pressing the flesh” with company men and their wives and children, creating a kind of endearing aura of patriarchy.

In later years this intuitive, personality-driven approach was deemed problematic by Junior and other successor senior executives who believed that Senior had created a culture and cadre of Yes Men and hadn’t implemented enough standards and professional protocols that could create stability for growth. But for decades of the company’s history (essentially the first half, to date) this approach seemed to work, and fantastically so. Company publications like “Business Machines” and sales achievement distinctions like the “Hundred Percent Club” put the company’s focus on employee well-being and professionalism and incentivized outstanding achievement in the dawn of the era of lifetime commitment to big companies.

Something that shocked me as I read was how much of IBM’s growth could be attributed to solving statistical problems for the US and other national governments:

IBM more than doubled in size during the New Deal… Social Security… made Uncle Sam IBM’s biggest customer.

Wow! I suppose someone else could’ve come up with the technology as well, but it is kind of amazing to think that the evil New Deal and the disastrous Social Security pyramid scheme would have been too burdensome to administer without the existence of IBM tabulating machines which were a major time saver. It reminds me of Palantir Technologies, which helps the NSA, CIA and other foreign governments conduct surveillance work on target populations, another way to profit off of coercive interference in society’s affairs.

This trend didn’t stop with the New Deal but only started there. During WW2 the company converted many of their factories to help produce armaments (a fairly common industrial practice during the time, but still remarkable) and after the war one of the big incentives (and indeed, initial sources of research funding) for switching the company’s focus to electronic computing solutions were the ongoing “national defense” needs of the US military as the Cold War wore on.

Words of wisdom

I enjoyed the many old-timey nuggets of wisdom and rules about manners sprinkled throughout the book which were mostly remembrances of Junior of things Senior had said to him as he raised him or mentored him in the business. For example, Junior talks about the first time he road a cross-country train with his father on a business trip and the way his father taught him to clean up the wash basin in the bathroom of the railroad car to be considerate of others. “The person coming after you will judge you by how the place is left,” he tells him as he uses a towel to wipe down the basin before and after shaving in it. He talks about the importance of leaving the basin in a clean state so that the next person will have “the same chance you had”. There is a deep moral lesson here that goes well beyond the world of men shaving– this is a version of the Golden Rule, not just considering how upsetting it would be to have someone leave a place in a state of disarray for you, but then following that logic through to performing a service voluntarily for other people in trying to leave the world a little bit nicer than you found it.

In another instance, Senior lectures Junior about the practical reasons for treating even the “lowly” members of society in a kindly and generous fashion:

There is a whole class of people in the world who are in a position to poor-mouth you unless you are sensitive to them. They are the headwaiters, Pullman car conductors, porters and chauffeurs. They see you in an intimate fashion and can really knock off your reputation.

Those who enjoy shows like Downton Abbey are familiar with the idea that the “servants” of the world end up having an interesting amount of power and leverage over those they serve because they are so familiar with them they know their weaknesses, secrets and bad habits. There is something noble and self-aware in Senior’s advice here– a cultivated awareness of the reality of power and influence, mixed with a genuine empathy for treating even the relatively less fortunate with respect and concern. It might be read as “These people could really knife you if you don’t pay attention” but I think it is also honestly read as “Don’t forget these are people, too, and they want and need kindness regardless of their station in life.”

Another endearing moment comes when Senior teaches Junior about how he manages his executives:

“Well, I haven’t shaken up So-and-so for a while. So I’ll get him in and ask some questions about his department and in the process part his hair a little. He’ll get a pat on the back if I find something good or a kick in the tail if I find something bad.”

The imagery of “parting someone’s hair” says a lot about the relative authority of the two people in this “process” and while kicking someone in the tail sounds like bullying, it was clear that Senior gave quite a few pats on the back, as well, and when he dished out the ass-kickings, they might have been deserved– these were grown men dealing with a multi-million dollar business, after all, and if they weren’t bringing their problems to Senior’s attention but rather waiting for him to discover them, shame on them.

In teaching Junior about how to be an executive, Senior advised “what a chief executive does outside his business is just as important as what he does at his desk”, which was another idea I found interesting. I’ve been skeptical in the past of chief executives who seem to spend more time glad-handing than running the business. But I’ve come to appreciate that a lot of running a business simply is taking care of relationships– with customers, employees, vendors and even members of the local community. IBM’s business was dependent upon political grace, so there is perhaps a more sinister side to this advice from the standpoint of simply being a businessman but it was an interesting idea to ponder, nonetheless, that the chief executive’s identity and role extend beyond his office hours.

Senior was clearly a hard-driver and a hard-charger himself. So I was interested to hear about his daily routine:

He had his day set up so that he got up at seven, played tennis from seven-thirty to eight-thirty to stay in shape, got to work on time, did his work, went home, read great books for an hour, had dinner, listened to classical music for a while, and went to bed.

Senior ended up dying of starvation; his stomach was so scarred from stress-induced ulcers that it essentially closed up and wouldn’t let enough food in, and he didn’t want to go under the knife and so chose a fairly painful death by starvation (more on health issues in a moment). But despite this, he lived to age 82! I think that’s still considered a long time to live and I am always curious what a person’s habits were when I hear of such longevity, so it was pleasing to see that he put emphasis on daily physical activity as well as daily relaxing, contemplative activity (reading and music listening). Interestingly, breakfast didn’t seem to play a large part in his routine although Junior recounts many times when he had lunch brought in despite it being ignored in this telling.

A few other choice ideas, on restraint:

What you haven’t said, you can say anytime.

And on the value of friendship:

Don’t make friends who are comfortable to be with. Make friends who will force you to lever yourself up.

The son also rises

So, Senior had a knack for keen insight, but what about Junior?

While Senior was the builder, Junior was the administrator and manager. He seemed to take what he learned from Senior and build on it, so many of his notions seemed like continuations of the thoughts of Senior. For example, consider Senior’s advice about how chief executives should behave as Junior extemporizes about the relationships of businessmen:

A good businessman needs a lot of friends. Cultivating them is a laborious process, and how well you succeed is a direct result of how much effort and thoughtfulness you bring to bear.

He isn’t talking about friends in the business. He’s talking about friends outside of the business, which to me sounds like an echo of the idea that the chief executive’s job extends well beyond life in the office.

Similarly, he recounts a tale about the importance of making good introductions,

I stuck out my hand and said to him, “I’m Tom Watson Jr.”

Offering one’s name with a hand shake ensures that the other person is not put in the uncomfortable spot of being expected to remember people he’s only met once before, which engenders a sense of gratitude and respect immediately. Consider that this was the practice of an individual leading one of the largest and most well-known companies in the world and he still made the effort to be forward about his identity like this.

I also made a note of Junior’s characterization of the political structure of business:

The government has checks and balances, but a business is a dictatorship, and that is what makes it really move.

I think there is consensus building in business, too. It’s hard to keep a team cohesive and productive over a long period of time if people don’t feel like they contribute ideas and that those ideas get seriously considered. But I do understand the idea that ultimately decisions have to be made by somebody, that is, one person, and a business with a strong will behind it can make those decisions more effectively because everyone may be listened to but they don’t necessarily all get a vote. In the business world, people tend to vote by exit which is rarely an option in the world of politics.

The wealth of health

As mentioned earlier, Senior ended up choosing death by starvation when his health maladies caught up with him, though he made it to age 82. I noticed that both Junior and his younger brother (who headed up IBM’s non-US business) suffered heart attacks in their middle-age, attributed to the high stress of their positions.

Junior describes a life of almost continual travel and social functions, not just for himself but for his father and his brother. It was clear reading the book that the Watson clan and IBM executive leadership in general were part of the “global elite”, they knew dignitaries and heads of state from around the planet and were deeply connected to American political figures as well, a confusing blending of public and private prerogatives and relationships. There were many chapters where Junior described so many different locales and travels simultaneously that is almost seemed as if he was everywhere at once– at the very least he would spend long stretches of time away from home engaged in high level networking. It was a fascinating glimpse into “how the other half lives.”

But it was also terrifying from a health point of view. It is just hard to imagine this high-paced lifestyle allowing one to live with optimal health and longevity. Along with suffering a heart attack, his brother seemed to be frail enough to die from a “fall” at age 55. Junior ended up quitting his official business responsibilities following his heart attack which he reflects on with positivity in the book, saying it was a relief to have an opportunity to look critically at his life and get out while he still could. It seems to say a lot about the lifestyle he was living that he could so clearly connect his longevity to his work and chose the former over the latter.

Working with family

At the beginning of the book, Junior says that if you have the chance to go into business with your father, know that it will be difficult, but do it. I was fascinated by this strong suggestion given that he spends much of the rest of the book relating all the violent disagreements he had with his father, their latent power struggles, the continual struggles with self-esteem and even depression that he experienced living and working under the shadow of his successful father and so on.

There were many touching moments in the book where the reader is afforded a look at the parenting practices of Senior, who was truly from a pre-modern era. But there were also many that shocked my sensibilities of the proper relationship between parent and child, such as when Junior recalled how Senior handled tax documentation of his personal trust:

Each year his accountant would come around and have me sign income tax forms that were blank. He’d make an excuse that he hadn’t had time yet to fill them out. This kept up not only through college but ten years beyond, until I was a grown man with children of my own.

How would hiding this information from a child do anything but stoke their curiosity, fear and self-criticism? Why did this practice continue on even when he was a man with his own family (at which point he had long been a part of the business in a senior role)?

While the book offered many such puzzles and glimpses into family life for the accomplished Watsons, I couldn’t help but wonder how people who had achieved such greatness in so many areas had completely neglected to resolve interpersonal emotional conflicts and instead struggled with this source of unhappiness for decades. What is family for?

For me, reading about the early struggles and the early attempts at growth are always the most interesting parts of a story like Thomas Watson, Jr.’s, and IBM’s in general. I found myself less interested in what it was like being Bobby Kennedy’s friend, or getting tapped for the ambassadorship in Moscow. You can look at the history of the company and of the family and think, “It could’ve been anyone else, it’s not clear what they did that was special or unique beyond being lucky” but you can’t say they didn’t work hard, or purposefully. There’s no simple recipes or formulas for success in this book when it comes to business, family or life, but there are a number of things to think about, struggles that turn out to be common to all of us, great or small in our vision or accomplishments. I think that is where the value in this book lay for me.

Review – The Age of Cryptocurrency

The Age of Cryptocurrency

I should’ve known better than to buy a book touting “the age of” something that came into existence only a few years ago and is currently playing out. Living history? Only if it leaves a meaningful legacy behind. But after reading this breathless book about bitcoins and blockchains, I have my doubts.

According to the authors, the primary usefulness of the blockchain, what makes it revolutionary, is that it will allow for low cost financial transactions. Not improved privacy, accuracy or honesty in exchanges. Not an end to the menace known as government. A few basis points in savings on transactions requiring a financial intermediary.

And even then, that is doubtful. The blockchain does nothing of and by itself. Despite being the heralded horseman of the middleman apocalypse, it requires a bunch of middleman applications and services (still being developed!!) to be practically useful to anyone, and of course no one is building and operating those mechanisms for free. Hello, economic scarcity, nice to see you again!

That’s kind of the theme of this entire, horrible book. “Wouldn’t it be so cool if…” and “Things are going to be totally different when…” but we’re not there yet, and we might never be.

This book was prematurely written, poorly researched (hyperventilated hype and name-dropping is not journalism, it’s puff piece paid marketing) and offers little to anyone seeking to understand how the blockchain operates in layman’s terms, nor does it put the extremely short lifespan of this technology into a meaningful chronological context so one can follow where it came from and where it might be going.

Challenging the global economic order? Considering the amount of fraud the community has already witnessed as disclosed in the book, it appears to be more part and parcel and less revolution in the streets.

The blockchain may offer some interesting applications in due time that don’t involve stupid self-owning companies pursuing their robotic amoral self-interest, but in the meantime I’m bearish to indifferent about it all and will continue to keep a bemused distance from the phenomenon, including schtick introductions like this work.

Is Education Fundamentally A Technology Problem?

What happens when the computer engineering bubble hits the Silicon Valley finance bubble in a collision directly overhead of the philosophy of education?

AltSchool.

In “Learn Different“, the New Yorker surveys a for-profit, tech-inspired elementary education startup. Some key takeaways of the company’s approach to education, according to the reportage:

  • No professional school admin; school is run by teachers
  • “Micro-school” with small total enrollment
  • Mixed classrooms; pre-K through 3rd grade in combined learning environment
  • “Franchise” model; locations in major cities throughout the US
  • “Highly tailored” education that uses technology to track student progress
  • “Playlist” driven lesson plan; students work through pre-assigned steps on tasks of interest
  • Surveillance; students are recorded with video and audio for later playback and analysis by teachers
  • Big data; used to analyze student progress and adapt lesson plan to strengths and weaknesses
  • Private tuition, approx. $30,000/yr

According to the editor’s tag on the article, AltSchool is an example of “Silicon Valley disrupts education.” In the disruption literature there is the idea of disruptive and sustaining technologies– disruptive technologies create a paradigm-shift in the strategic world upon which the industry in question competes, while sustaining technologies simply allow for more efficient continuation of the existing competitive dynamic. Better horse breeding practices are an example of sustaining technology in the era of the horse and buggy, while the internal combustion automobile is an example of a disruptive technology in personal transportation.

If AltSchool is disruptive technology, then the questions are:

  1. What is the primary strategic principle for mainstream education?
  2. How does AltSchool represent a paradigm-shift?

It’s perhaps difficult to say exactly what the principle of mainstream education is. There are many interest groups who vie for influence over the system so it is by no means a monolithic group. That being said, there is perhaps a cohesiveness of interests: provide jobs and economic resources for “educators” and administrators (including the politicians who are the ultimate stewards of the system) while creating a student body that will be cooperative with the political system around it and willfully integrate into the various economic relationships that sustain it. “Question everything” this is not.

The AltSchool gives meek lip service to the idea of an individual-oriented learning experience, but upon further investigation it seems that this is not about making the student the master of his education, but making the education a more subtle component of the student’s social indoctrination.

Ventilla [the founder of the company] also wanted students to focus on developing skills that would be useful in the workplace of the future, rather than forcing them to acquire knowledge deemed important by historical precedent. “Kids should be spending less time practicing calculating by hand today than fifty years ago, because today everyone walks around with a calculator,” Ventilla told me. “That doesn’t mean you shouldn’t be able to do math—I shouldn’t have to whip out my phone to figure out if someone gave me the correct change. But you should shift the emphasis to what is relatively easier, or what is relatively more important.”

While there isn’t necessarily anything blame-worthy in being mindful of conditions in the workplace which students might one day be interacting with, it also isn’t exactly revolutionary to incorporate job-worthiness into one’s educational philosophy. The “workplace of the future” is an extrapolation of the “workplace of the present” into future periods.

In San Jose, students’ scores on annual state tests were made available only after the end of the school year. At AltSchool, Seyfert could keep tabs on her students’ daily, if not hourly, progress. Every task card on a student’s playlist is tagged to denote not just academic skills, like math and literacy, but also social and emotional skills.

What is the value of all of these statistics? If you are teaching to a standard (ie, you have an end goal in mind of what your student should “look like” when their education is “complete”), then being able to measure progress toward that standard would be instrumental. The application of technology to this problem of measurement might introduce some efficiencies or even  capabilities that are impossible without it. But then, this wouldn’t be a disruptive innovation but rather a sustaining innovation.

If your methodology is centered around the development of the individuality of the student himself, then the best such statistics can provide is a description of strengths and weaknesses. There would be nothing actionable as there would be no specific goal. Suzie is good at math. Jerry is good at reading. But what of it? And even then, these descriptions would only be valuable to compare Suzie and Jerry to others, but what value are such comparisons to the individual being compared? He cares not for it.

Like other AltSchool teachers, Seyfert was drawn to the startup because of its ambition to make systemic change. Two or three times a week, she told me, she gives colleagues feedback about the school’s digital tools. The Learner Profile, Stream app, and other tools are only about a year old, and AltSchool’s personalization still requires considerable human intervention. Software is updated every day. Carolyn Wilson, AltSchool’s director of education, told me, “We encourage staff members to express their pain points, step up with their ideas, take a risk, fail forward, and fail fast, because we know we are going to iterate quickly. Other schools tend to move in geologic time.” (Ventilla may question the utility of foreign-language acquisition, but fluency in the jargon of Silicon Valley—English 2.0—is required at AltSchool.)

The obsession of the school seems to be in building excellent quantitative measurement tools. These pieces of software can be updated and tested rapidly. But the educational principles themselves produce effects which are long in both maturation and duration. We can’t be sure of their results until many years have passed, if even then, and they’re most easily tested through logical inquiry, not mathematical interpretation. As human nature and cognitive capability are not improving any faster than iteratively through “geologic time”, it’s unclear what value these rapid upgrades to the software provide to the improvement of the philosophic principles of education that have supposedly been disrupted by AltSchool.

There was some humorous contrary evidence:

The previous day, Otto said, a guest teacher had come in to lead several students in a 3-D-modelling project, using a Web site called Tinkercad. “We built little models online—some people built phone cases, or little towers, or yo-yos,” Otto said. “I built a toilet, because I thought it would be fun. It has lots of different components—you have the base, you have the seat, you have the back.” He clicked to the site and pulled up his model. “I was looking around at pictures of toilets online,” he said. “I think I want to make it a bit more shaped for your back. I also want really sanitary toilets. And I want to make it really comfy. I’m quite bony, and I’m small, and if they don’t have a cushion they hurt.” Eventually, Otto said, he planned to 3-D print his prototype: a model toilet, fashioned to his personal specifications and preferences.

I really enjoyed this comment and I am glad the journalist captured it. First, it suggests that maybe the AltSchool is creating some spaces for the individual student to explore their interests, deeply. Second, Otto comes from a financially successful family whose parents are accomplished corporate types. It seems that, given the freedom to pursue his own interests, he can think of nothing better than building a comfortable toilet. That must give mainstream educators (and maybe even his ambitious parents) the chills!

If you can pull your own preferences out of your head for a moment and just look at this boy’s effort from his own perspective, though, isn’t it glorious?

The point of the hackathon was to sketch out in code potential solutions to “robot tasks”—routine aspects of a teacher’s job that don’t require teaching skills. Kimberly Johnson, the head of product success and training, addressed the team. “Basically, what we have told teachers is we have hired you for your creative teacher brains, and anytime you are doing something that doesn’t require your creative teacher brain that a computer could be doing as well as or better than you, then a computer should do it,” Johnson said.

Since the previous hackathon, three months earlier, teachers at AltSchool had filed more than a hundred digital “tickets” to Johnson, indicating how AltSchool software might be improved. Some teachers had asked for a more streamlined way to input data. Johnson acknowledged, “It is a lot of work to go into each card and click the learning objective and click the score and click ‘save.’ It’s just four or five clicks, but it adds up.” The teachers also wanted to enter assessment scores to groups of kids at once. “If you say, I want to give all of these kids threes, and all of these kids fours, there must be an easy way to do that,” Johnson said. “I don’t know what it would look like, but you could probably hack something together.”

Again, the emphasis on data technology over teaching philosophy. Now, it sounds like the school is trying to free up the teachers to focus on teaching by improving their technology interface. But the question begged is, “What makes the technology interface so central to their teaching philosophy?” This comes back to the question of disruptive versus sustaining technology. How is the student served by all the assessments? Life is its own assessment.

But AltSchool’s philosophy of education is also essentially utilitarian, even as it celebrates the individuality, autonomy, and creativity of its students. It holds that children should be prepared for the workplace of the future—and that the workplace of the future will demand individuality, creativity, collaboration, and critical thinking.

We turn now to that great social philosopher, Ludwig von Mises, who said of genius and the creation thereof in his “Human Action“:

The genius does not deliver to order. Men cannot improve the natural and social conditions which bring about the creator and his creation. It is impossible to rear geniuses by eugenics, to train them by schooling, or to organize their activities. But, of course, one can organize society in such a way that no room is left for pioneers and their path-breaking.

Now here are two very different philosophies. At AltSchool, “individuality” and creativity are being taught as part of the lesson plan and the methodology of the school in service of the demands of a future workplace so envisioned. For Mises, the creative individual is something natural, inexplicable and uncontrollable and he is in service to himself first and foremost.

I think it is Mises’s ideas that are disruptive here.

AltSchool’s perspective does not necessarily require abandoning texts that have long been considered central to a humanist education, but it does mean approaching them anew. One middle-school class undertook a lengthy study of the Iliad by focussing on the theme of “rage” and designing a spreadsheet that logged instances of it. They then used data-visualization techniques to show their findings, and wrote persuasive essays based on their results. Afterward, their teacher, James Earle, wrote, “Analyzing a piece of literature this way turns the work into a piece of robust data that can be understood quantitatively, in addition to allowing a qualitative reading.”

But what is the value of this new understanding? What does it add that is new and different? Yes you can do this, but what thinking informs the should?

Mediratta [vice-president of product] envisaged a time when AltSchool technology would get “into the sci-fi realm.” What insights might be drawn from aggregated data culled from video and audio? He spoke of the video moments that teachers were bookmarking. “The next useful thing would be for us to analyze all the things that are bookmarked, and to draw inferences,” Mediratta said. “Like, bookmarks seem to happen when the classroom is noisy. So let’s generate a few other interesting moments that the teacher might want to look at—say, a moment when the classroom was full of kids but was dead quiet. What was happening there? Is this good? Is this bad? Or you could look at a moment when it was absolutely chaotic—but maybe that is what the activity called for. So we can start applying machine learning to this data to start driving inferences. Maybe what we should be doing is detecting when the classroom gets noisy, and then we could have the head of the school, who is also an educator, stop by your classroom and participate and help.”

The meta-philosophy of modern education is control, the schooling agenda is a by-product of the aim to control others. The desire to control the schooling environment seems to be what is behind the focus on applying technology to surveil and measure the students and their activities.

AltSchool is not disrupting anything as far as I can see. From my understanding of what education is and what education isn’t, I don’t see a place like AltSchool meeting my needs, but that does not mean it won’t be successful in terms of the paradigm of mainstream education, within which I believe it is situated.

What Does The Future Hold For Gaming? Interview With Gabe Newell

Gabe Newell, head of the innovative and successful game software-plus-gaming platform developer Steam, was interviewed at a recent shindig put on by Silicon Valley venture capital and technologist sponsors (is Valve in play?!).

Somehow, the world of app-gaming and smartphones-as-game-platforms haven’t torpedoed Valve’s growth and financial success. More cold water thrown on that unsophisticated theory. Meanwhile, Newell had some interesting concepts on the future of game distribution and design:

Everything we are doing is not going to matter in the future. … We think about knitting together a platform for productivity, which sounds kind of weird, but what we are interested in is bringing together a platform where people’s actions create value for other people when they play. That’s the reason we hired an economist.

We think the future is very different [from] successes we’ve had in the past. When you are playing a game, you are trying to think about creating value for other players, so the line between content player and creator is really fuzzy. We have a kid in Kansas making $150,000 a year making [virtual] hats. But that’s just a starting point.

Now, this is something Apple has figured out and it’s something Nintendo has figured out but is still in the early stages of implementing– users as content-creators and value-adders. I will have my review of “Nintendo Magic” up soon which goes into this a bit more but one of the most interesting takeaways I had was the fact that Iwata discussed empowering users themselves to create content and experiences with their hardware and software that would add infinite replayability to their games. This was part of their strategy for addressing the main challenge of game-making, which is that over time your game becomes stale and boring.

Related to this, Newell discussed creating open-platforms:

In order for innovation to happen, a bunch of things that aren’t happening on closed platforms need to occur. Valve wouldn’t exist today without the PC, or Epic, or Zynga, or Google. They all wouldn’t have existed without the openness of the platform. There’s a strong temptation to close the platform, because they look at what they can accomplish when they limit the competitors’ access to the platform, and they say ‘That’s really exciting.’

Part of creating an open platform means designing something that is easy to develop for. Nintendo struggled with this with the N64 and Gamecube, systems which were technologically sophisticated and powerful, but not easy to develop games for. Meanwhile, the Sony Playstation and Playstation 2 were relatively simple to develop for. The end result? Much wider software library on the Sony systems. And it is software desirability that drives hardware adoption.

Finally, the Wiimote and its new control scheme was central to the Wii’s success and Nintendo’s strategy to expand the gaming population and allow users to enjoy new experiences. The smartphone/iPad revolution has introduced the value of touchscreen control (which, by the way, the Nintendo DS adopted prior to the smartphone revolution) which has continued with the Nintendo 3DS and which is now coming to the Wii U with the touchscreen, tablet-style game controller to be packaged with the system.

But Newell actually thinks touch is a temporary control measure and that it’s “back to the future” when it comes to the next evolution, which he sees as being more motion control-oriented again:

We think touch is short-term. The mouse and keyboard were stable for 25 years, but I think touch will be stable for 10 years. Post-touch will be stable for a really long time, longer than 25 years.

Post touch, depending on how sci-fi you want to get, is a couple of different technologies combined together. The two problems are input and output. I haven’t had to do any presentations on this because I’m not a public company, so I don’t have any pretty slides.

There’s some crazy speculative stuff. This is super nerdy, and you can tease us years from now, but as it turns out, your tongue is one of the best mechanical systems to your brain, but it’s disconcerting to have the person sitting next you go blah, blah, blah, blah.

I don’t think tongue input will happen, but I do think we will have bands on our wrists, and you’ll be doing something with your hands, which are really expressive.

Was Nintendo ahead of its time? Will Nintendo “return to its roots” on this? Perhaps the design team is already thinking this way? They haven’t abandoned the Wiimote with the next-gen Wii U.

Personally, what Newell is saying makes sense to me. I think touch has been innovative, and for certain applications it is both clean, intuitive and as complicated as control need be. But it is not deep enough. You will not be playing Call of Duty or a modern shooter with touch alone. RPGs could be handled with touch but it would restrict some. A 3D platformer would be a boring disaster with touch. I don’t think critics of Nintendo (gamers and non-gamers alike) pay attention to details like this.