A History of Economics

I forgot to mention I read this book a few weeks ago. Galbraith is an excellent and entertaining writer.

An underlying theme is Galbraith's emphasis on how the economic ideology of different historical periods seems to flatter those who hold power. Hence you have physiocrats in France during the 18th century, mercantilists during the 17th century, and neoliberalism during much of the 20th century, with a dash of Keynesianism for those who like that sort of thing.

I was reminded of this book whilst reading this lengthy thread at Crooked Timber in which Daniel "dsquared" Davis argues that economics should really be split into two disciplines: industrial cybernetics and political economy, with one being based on the development of practical applications of empirical research (like engineering) and the other being based on a discussion of the ethics, morality, and political consequences of different policies (basically a branch of political philosophy).

IIRC Galbraith endorsed this point: the idea that you can separate ideology from reality in political discussions is naive in the extreme (as Daniel argues here). Also Galbraith coined the term "the conventional wisdom" to describe beliefs that are widely assumed to be true for the sake of ideological convenience (think EMH, rational agents, drugs are evil etc)

I was going to write up a lot of quotations but frankly I can't be bothered: I advise you to buy and read a copy of this excellent history of this peculiar science.

[image from here]

House of Suns: definitely not a review

Just finished this 'ere book by Al Reynolds.

Thoughts:

1) An alright 500 page book with a good 250 page book struggling to get out.

2) There is a lot of boring, pompous, non-political politics goes on in "the Line". I feel the concept of someone creating thousands of clones of themselves and sending them out to explore the galaxy is good, but Reynolds kind of let it go without thinking through how it would operate IRL.

3) I don't know if it's a style thing (Stephen Baxter does it as well) but none of the characters talk as people talk. Ken MacLeod is much better at this sort of thing.

4) The most interesting characters (the Doctor and the Spirit of the Wind) don't get nearly enough of the airtime that is instead given over to the unconvincing political pomposity.

That said I really enjoyed this book. It's not as good as Century Rain or Pushing Ice, but is considerably better than Prefect.

The Accidental Pornographer: not actually a review

A brief summary of lessons learned from The Accidental Pornographer:

1. Do not fall in love with the concept before you have scoped out opportunities for expansion. Griffiths discovers that the potential market for his product is smaller than he assumed only after he is well into it.
   
2. Do not get hypnotised by the prestige of others. Griffiths uses M&C Saatchi for marketing, despite their high-cost.
   
3. In planning your cash-flow always bear in mind the worst case scenario.
   

I've actually met the author, Gavin Griffiths, though I didn't know who he was at the time. I was working in our local branch of WH Smith and he came in to ask if we had this book in stock, as he had written it and wanted to know if it had hit the shelves yet.

My fleeting impression of him was of an earnest and unobjectionable individual. This is reinforced by his book and his blog.

The book is recommended for much the same reasons as Paul Carr's book Bringing Nothing to the Party. It is story of business failure, though neither Carr or Griffiths fail completely.

And you learn more from failure than you learn from success. Karl Popper teaches us this.

The Night Sessions: a few thoughts

I read this book over the weekend. A few thoughts:

1) Very good treatment of religion. Harsh criticism of faith-based brutality mediated by a genuine understanding of the nature of faith. There is a part near the end that captures the essence of what losing a strong religious faith is like perfectly:

He knew exactly what he now believed, because it was exactly what he had rejected until now. He'd stepped out of shattered armour not naked and shivering, but fully clothed. It was as if his new world-view had all along been inside the armour and being kept in, rather than outside and being kept out.

2) Very plausible treatment of sentient robots. Probably the best treatment I've seen in a while. The key point that MacLeod makes is that yer typical sentient robot is likely to have a superior theory of mind to yer typical sentient animal. Therefore robots are likely to be kinder, gentler, and more empathetic than humans.

The book is strongly recommended, being well-written, and the characters spend a lot of time talking in pubs. There is little and life that could not be improved by spending more time talking in pubs. Certainly Stephen Baxter's work would gain a lot.

[pic borrowed from here]

The End of Politics: a review

I stumbled across Chris Dillow's blog (entitled Stumbling and Mumbling) after reading repeated references to managerialism in The Yorkshire Ranter and DSquared Digest.

A brief read of Dillow's blog suggests he is clearly too clever by half and, which is more, he knows that intelligence is irrelevant if you don't pay attention to empirical observations, or further are incapable of making accurate empirical observations.

Which leads into The End of Politics - Dillow's book.

Dillow's thesis is that, contrary to the standard caricature of being "all spin and no substance", New Labour does have a distinctive ideology.

This ideology holds that it should be possible to combine equality and economic efficiency, and that there is no trade-off between these two goals. Any problems that emerge can be dealt with through effective management.

Dillow calls this ideology managerialism. Managerialists believe that the job of government is to behave like managers of a company. Managerialists do not perceive the inherent trade-offs and conflicts of interest that are endemic to politics, and are indeed the reason for the existence of politics. Managerialists believe conflicts of interest can be resolved with good leadership and appeals to a well-defined national interest.

Managerialism is distinct from the scientific management of Frederick Winslow Taylor, which was concerned with organising resources effectively. Rather managerialism is the belief that there exists an abstract concept of "good management" that can be applied to every situation, regardless of the underlying organisational substrate.

Managerialists are obsessed with the idea that the world is new and constantly changing, thus simultaneously justifying managerialist action and ensuring that it is impossible to objectively test the efficacy of a managerialist policy because by the time it is implemented things will have changed.

Dillow also draws a link between Old and New Labour, describing how they are defined by their desire to achieve equality and economics efficiency simultaneously.

Dillow argues that there are trade-offs in politics that can't be managed away.

Further he argues that notions of "economic efficiency" or "equality" or even "rationality" are ambiguous and incoherent in and of themselves. He cites Newcomb's Problem to identify areas where traditional conceptions of rationality are limited.

Dillow shows that the arguments that globalisation have changed everything are false, and that concern over globalised capital and labour is as old as Adam Smith.

Instead, globalisation is used to justify New Labour's managerialist schemes.

Globalisation isn't necessarily irreversible, as the existence or non-existence of tariffs or immigration controls are at the whim of politicians.

Dillow shows that the evidence as to whether the national minimum wage destroys jobs is inconclusive, but taken as a whole, the research generally seems to indicate that the national minimum wage does destroy jobs but this is difficult to detect in aggregate economic data.

The attempts by the Beveridge-report inspired postwar settlement to achieve full employment lead to worker militancy and increased inflation, as workers campaigned successfully for higher and higher price rises in response to increased inflationary pressures that were in fact being caused by inflationary pay rises.

Dillow's arguments are a recurrent theme in what I've been reading. The Black Swan by Nassim Nicholas Taleb, The Origin of Wealth by Eric Beinhocker and now The End of Politics all have in common an empirically-supported belief that the powers of human rationality are more limited than we tend to assume. That centrally-planned projects often fail and that extensive government oversight of the economy is generally a bad thing.

So if the capacity of political leaders to manage things is inherently limited in all sorts of ways what is to be done?

The title The End of Politics is appropriate: Dillow pours flammable liquid over all the most cherished ideals of all politicians and sets everything alight.

Given the robust and thoroughly empirical nature of this book I am entirely persuaded by Dillow's arguments that most political projects are stillborn. There is never enough information for politicians to make good decisions, even if they were capable of doing so, or even had a clear idea about what qualifies as a "good" decision.

As an alternative to top-down managerialist politics Dillow argues in favour of the open society: that decision making should be as democratic as possible, simply because no centralised authority can possess all the necessary information to make good decisions.

Dillow believes hospitals should be run by doctors and nurses, and schools run by teachers, because no centralised manager in Whitehall can possibly predict "the facts on the ground."

He also suggests the intriguing idea of a citizens basic income as a way of partially solving the problem of welfare vs. working tax credits. It's an interesting idea, and one that appeals to the dilettante in me.

The basic lesson of The End of Politics is that in the complex world in which we live political and business leaders need to be more humble in the face of the inherent limitations of centrally directed institutions.

The best way to get anything done is to create the circumstances by which effective solutions can be evolved from the interactions and daily business of all the millions of people and machines in the world.

Nowadays, as professions become more and more specialised, it is important to hand control back to the professionals. Just as David Allen's Getting Things Done system was defined by Wired magazine as "Taylorism for the modern knowledge worker."

Just as the study of productivity has shifted emphasis from centrally-directed institutions to professional individuals Dillow argues that the response to increasing complexity in the world is to decentralise politics and business.

Both The End of Politics and The Origin of Wealth convey the message that economists and policy makers need to be more humble about the extent to which the economy can be controlled and that the best laid plans gang aft aglay.

Dillow advocates an open society and more genuinely democratic debate in which heterodox views and those who stand to lose out from policies are given a fair hearing. Political debate is likely to be fairer if things are done in the open.

My response to this book was initially fatalistic: if the world is so complex that we can never hope to control it, why bother attempting anything?

Dillow's answer is that government has a role in creating the circumstances in which innovation can take place. But it is not the role of government to attempt to change people or manipulate the economy, because it is incapable of doing so effectively.

In a broader context it is clear that our conception of human nature is changing and altering. We are coming to realise that we are not wholly rational, and even that rationalism itself is a canard.

Dillow has an excellent blog: Stumbling and Mumbling.

Against a Dark Background: not a review

I've finished reading Iain M. Banks' Against a Dark Background. Here are a few thoughts, bullet pointed, as this isn't a review:

• This is a wonderfully indulgent piece of science fiction. The scope of imagination is huge and the cinematic expanse of Banks' imagination lends a sense of wonder to the story.
• This is a profoundly humanist novel. The notion that people are truly alone and this life is all is explored through a variety of mechanisms and tropes. The Solipsists insistence that they are alone in their own universe, the finality of death and the transient nature of being are persistent themes. Also the nature of the System in which it the story is set.
• This is a dark novel. Lots of death and failure and despair and general unpleasantness.
• That being said Banks doesn't Pull the Nasty in the same way as he has done in The Algebraist and Consider Phlebas.

Well worth a read.

My reading list

Imperial Life in the Emerald City: Inside Baghdad's Green Zone by Rajiv Chandrasekaran

Rationale: I wasn't paying very close attention to Our Glorious Ally's Recent Imperial Adventures whilst it was happening. Partly this was because this sort of thing is difficult to piece together when you're reading it on a daily basis in the newspapers and partly because I was busy being a truculent teenager.

Anyway this seems to be the standard text on the subject and will hopefully give me a good grounding in What the Hell Happened.

The Trouble with Physics: The Rise of String Theory, the Fall of a Science and What Comes Next by Lee Smolin

Rationale: I enjoyed the discussion of theoretical physics in The Quark and the Jaguar by Murray Gell-Mann, which was published in the early nineties, and I also enjoyed The Sleepwalkers by Arthur Koestler. I really want to find out what's happened since, and what the current state of play is as regards Big Science.

This book was recommended to me by one of my physics teachers a few years ago, and at the time was being serialised in The Times. I skimmed through it a while back in a bookshop and was impressed by the tone and content.

Introduction to Materials Science for Engineers by James F. Shackelford

Rationale: this is one of the set textbooks for the course I am (if everything works out) starting in September (there will be a few of these to come).

Manufacturing Engineering and Technology by Serope Kalpakjian and Steven Schmid

Rationale: Again another set text. I want to have a vague familiarity with the course materials well before the course actually starts. The reason for this is that I learn best when presented with a fairly long runway. I also like the opportunity to become comfortable with a particular textbook layout before using it in earnest.

The End of Politics: New Labour and the Folly of Managerialism by Chris Dillow

Rationale: This book is much discussed by the likes of Alex Harrowell and Daniel Davis and Dillow's blog is quite superb. If his book is even half as interesting and engaging as his blog then this will be a worthwhile read.

The Hidden Family by Charles Stross

Rationale: I enjoyed the previous book in this series and since I finished it the sequence has been praised and commented on by Nobel economics laureate Paul Krugman. Definitely not one to miss out on.

Foundations of Engineering by Mark T. Holtzapple

Rationale: Another set text!

Mathematics for Engineers: A Modern Interactive Approach by Anthony Croft

Rationale: And again.

Management for Engineers, Scientists and Technologists by John V. Chelsom

Rationale: Same again - nothing to see here.

Traders, Guns and Money: Knowns and Unknowns in the Dazzling World of Derivatives by Satyajit Das

Rationale: I've read Nassim Nicholas Taleb's books,The Black Swan and Fooled by Randomness, and enjoyed them immensely. However I would like a more in-depth and technical look at all the derivatives, investments, quantitative finance, mortgage-backed securities and other paraphernalia of the ongoing economic troubles.

This book seems to get high reviews and from the brief excerpt on Amazon seem to capture this particular facet of the Zeitgeist rather well.

The Accidental Pornographer: A Story About Having a Go - And Succeeding... in Failing by Gavin Griffiths

Rationale: After reading Paul Carr's enjoyable account of trying and sort of not-quite failing,Bringing Nothing To The Party , I sought out similarly themed books. This looks to be one such in which the eponymous pornographer protagonist tries and fails.

And as an additional bonus he apparently meets none other than my favourite business antihero Felix Dennis!

Against a Dark Background by Iain M Banks

Rationale: Well, I'm reading this at the moment so I've rather jumped the gun as far as rationale goes. It is a spectacularly florid book with titanic set pieces and more Big Dumb Objects than you can shake a space elevator at. Truth be told it could easily gain from content-trimming if you prefer tighter reads, but I've always enjoyed Banks' Banksishness so it's all puppy for the fat as far as I'm concerned.

Thoughts on Feersum Endjinn and writing

This book has an immense span of imagination. Banks has an ability to create ideas that are just over the boundary of the absurd and yet implements them so that they seem almost homely and reasonable.

There is, in my limited experience of writing, a sort of mental crash-barrier between the familiar and comfortable and the strange and disturbing.

Great SF writers possess a kind of intellectual bravery in vaulting the barrier and hauling the strange into the familiar.

When writing I will pursue an idea as far as I can but there is always a part of me too willing to reject a plot or character or situation as too ridiculous for further exploration.

Feersum Endjinn starts superbly: with typical Banksian whimsy gradually revealing an immense canvas that (had I ever thought it) I would have immediately rejected.

There is a tendency towards dues ex machina in the plot: and the Bad Guys aren't as unpleasant as most Banks villains. However the story is compelling enough and the Good Guys interesting enough to follow through.

An excellent read.

On The Origin of Wealth

After a brief hiatus I have started reading this book again. Everything Taleb has written, sans the epistemic philosophy and general snark, can be seen as a subset of this book.

As I read Beinhocker is discussing how the observation that businesses evolve in the marketplace can be applied to practical strategy. He makes the point that for the most part conventional strategy and long-term planning is futile in the face of the complex non-linearities of the marketplace.

Beinhocker grounds his descriptions of economic activity in modern physics itself, rather than attempting to ape physics as many early economists (like Jevons and Walras) did.

Beinhocker defines wealth as useful order. And order is information, and useful information is knowledge. So knowledge is wealth.

Beinhocker says that value is created by:

• Irreversible actions
• Local reductions of entropy and
• Fitness

Fitness is determined by an evolutionary process, the free market, which can be thought of as a knowledge-generating machine.

Beinhocker advocates ideas similar to Alex Harrowell of the Yorkshire Ranter (who I suspect is familiar with the book), stating that we need to build institutions that evolve more effectively.

This sentiment runs counter to many traditional conceptions of Big Man, top down, authoritarianism. Politicians are praised for ignoring evidence and not adapting to circumstances.

The scientific method and free markets work so well because they lead to the creation of a large number of ideas and then subject each idea to testing, selecting the most successful ones, replicating and recombining these successful ideas, then repeating the whole process continuously.

The outcome is a an increase in knowledge, and hence wealth.

Productivity in shops

One of the problems with working in a second hand bookshop is that although you spend a large portion of your time sitting in front of a PC on your own you're productivity drops to nearly zero.

Every time someone asks you a question or buys a book it breaks your concentration, then there's all the usual stuff - Twittering, blogging, surfing, and general procrastination.

I'm not complaining - I'm just saying that this is the reason I've managed to get so little work done.

And in a way I am being productive, or at least as productive as misanthropic booksellers ever are...

/Bernard Black

On writing

Malcolm Gladwell writes that you require 10, 000 hours of practice to become truly skillful at something.

This highlights the problem with the nature/nature question: is performing 10, 000 hours of practice in anything the result of a biological inclination, or an accident of circumstance? Or is it a combination of both?

The areas I wish to become skillful in are the fields of writing, draftsmanship, and design. Being able to write well and knowledgeably about a wide range of subjects is a core part of this skill.

To get some perspective on my 10, 000 hours consider this: if it takes me one second to write one word (and considering the possibility of multiple drafts, research-time-per word etc this is quite likely) then I will need to write some 36, 000, 000 words to become truly proficient.

Professional writers often get this experience in journalism (as in the case of Charles Stross and Malcolm Gladwell) or just through huge amounts of practice.

So far in my life I have probably written around half a million words. This needs to end now. I need to write more and more often.

As I imagine it writing is like anything else: if you keep doing it you will eventually become proficient. If you keep the wheels spinning and well-oiled things should develop in due course.

I also need more practice at narrative-building. I need to learn how to create a plot and build characters and plug everything together.

I suspect that there are plenty of writers who don't write 36, 000, 000 words in their entire lives. Writing copy may be one of those skills that reaches a plateau of excellence before it needs to be given an additional boost by an insight into the human condition.

On a completely unrelated note it would be a good idea for me to get a new keyboard if I intend to write so much in the future. This one is really appalling.

May Almighty illuminate our intellect and inspire us towards the righteous graph...

At the moment I'm reading The Origin of Wealth by Eric D. Beinhocker because Amazon kept bugging me with it every time I bought Taleb.

And those Amazon algorithms know their stuff: Beinhocker is like Taleb only more polite, less bombastic, and generally more interesting.

TOoW leaves out most of the epistemological stuff and concentrates on wealth. So far Beinhocker has gone over why neoclassical economics is nonsense (it treats the economy as a closed, non-dynamic system, which it isn't, and treats people as perfectly rational, which they aren't).

Beinhocker is working his way towards describing complex adaptive systems of the Murray Gell-Mann variety...

In the meantime he also writes about non-linear equations and deterministic chaos: like this equation here:

B_t+1 = r * B_t * ( 1 + B_t)

Where B is the value of something at time t, and r is some other number.

When r is set to 1:


Now if you set r to 2:




Now if you set r to 3.3:


Now if you set r to 4:


Which is, apparently, chaotic.

I had always thought that in mathematical terms chaos meant "randomness", but in fact the two are very separate ideas.

A system is chaotic if it:

1. Is sensitive to initial conditions,
2. Is topologically mixed, and
3. Has dense periodic orbits.

Now I understand the first of those points, but not the second or third.

More reading to do methinks...

Living the good life elegantly

One of the ideas Nassim Nicholas Taleb comes back to again and again, both in The Black Swan and Fooled by Randomness is that you can and should live elegantly.

Living elegantly means being stoical about loss and disaster, and not working too hard or becoming overly stressed when things don’t go your way.

It also means avoiding “noise.” In this context noise is the constant humdrum flow of news and factoids that we all expose ourselves to in this information-saturated age. Reading the paper every morning doesn’t make you any more informed than someone who spends their time reading philosophy and history textbooks.

Taleb argues that the older something is the more likely it is to be of value: things that aren’t valuable tend not to be preserved or sustained in culture. This leads to an interesting comment on religion: whyever people believe in god is beside the point, millions of people do and have believed in God for thousands of years so there must be some psychological or cultural value to it. I’m inclined to agree with this, but not with the general point that “because we’ve always done it” is a good argument in favour of anything.

My objection is to the imposition of religious cultural values on those who do not believe: particularly the recent complaint to the ASA that the atheist bus is "offensive."

Stephen Green, national director of Christian Voice, sez:

"There is plenty of evidence for God, from people's personal experience, to the complexity, interdependence, beauty and design of the natural world.

"But there is scant evidence on the other side, so I think the advertisers are really going to struggle to show their claim is not an exaggeration or inaccurate, as the ASA code puts it."

Taleb would of course point out that you can't prove a negative ("God does not exist") and I would point out that the atheist bus does not claim to: "There is probably no God."

This statement is induced partly from lack of any indication of the existence of God so far (based on repeatable experiment, rather than subjective experience) and deduced from the internal inconsistency of most conceptions of God.

In The Black Swan Taleb presents a strong finding from cognitive psychology called the information bias that shows that being exposed to information more frequently does not necessarily improve your ability to make decisions.

Taleb also argues that being presented with a constant barrage of negative news is also bad for you from the point of view of happiness.

I’d like to draw a link between what Taleb says and the ideas of the Viridian design philosophy. In Bruce Sterling’s last note he says that people should minimise the amount of badly-designed clutter in their lives so that they might be happier. In the same way Taleb is advocating a reduction in information clutter, and concentrating on quality rather than quantity of data.

Nassim Nicholas Taleb and Felix Dennis

In his answer to the recent Edge Question 2009 (What will change everything?) epistemiology philosopher Nassim Nicholas Taleb touches on a topic close to my heart [from Edge.org]:

People want advice on how to get rich –and pay for it. Now how not to go bust does not appear to be valid advice –yet given that over time only a minority of companies do not go bust, avoiding death is the best possible –and most robust --advice.

Taleb is fond of pointing out that the "how I did it" genre of business/entrepreneurship books is essentially useless as a source of business advice because all the writers (who he asserts consist entirely of successful, retired entrepreneurs) suffer from the survivorship bias - the only reason they're in a position to lecture anyone on how to succeed in business is they did not fail.

As huge numbers of business startups do fail and the defining component of success is not failing there is very little value to be gleaned from reading the memoirs of self-indulgent millionaires.

The exception is magazine entrepreneur Felix Dennis, owner of The Week and The First Post (both of which I have stopped reading on Taleb's advice).

The reason Dennis' book How to Get Rich was so disappointing to this reviewer was that the he found the book largely anecdotal [from the FT]:

...this book is not so much about how we could get rich as how Dennis did.

The author has the good taste to admit that you have to be a little lucky to get on the rich list - as well as brash and single-minded. Unfortunately, he also has enough bad taste to reprint some of his own poetry, most of which revolves around himself and his pots of money.

Dennis' poetry notwithstanding I found the book both highly general but also highlighted by a series of anecdotes that show just how lucky Dennis was.

His first big break was when he wrote an exclusive biography of a kung-fu practitioner Bruce Lee just before the star died in mysterious circumstances, resulting in a surge of public interest and demand just as Dennis published the book.

On another occasion when Dennis was flogging membership packs for the Bruce Lee fan club the packs were shown on TV by a journalist who felt they were bad value for money - as a result thousands more people bought them.

Yet another time it was discovered (as Dennis was en route to his Caribbean home of Mustique) that his publishing company was due to suffer a catastrophic cash-flow crisis. The discovery was due to a change in accounting software that highlighted the problem just in time to avert bankruptcy.

Dennis is entirely open that his success is in large part down to luck, but he also includes a very practical point: when it comes to getting rich, it's what you own that counts, not your prestige, not your job title, or personal power.

And Taleb is wrong to say that you don't get books that describe how not to start a business. Raconteur and new media whore Paul Carr does just that in his amusing and entertaining account of how he failed to become a wealthy and famous web tycoon entitled Bringing Nothing to the Party: True Confessions of a New Media Whore.

I'm gradually coming to suspect that entrepreneurship is for suckers - if you really want to become happy, it's best to get a well-paying and reliable job that you enjoy.

Or better yet, rather than be a hacker, be a backer. Taleb mentions somewhere in The Black Swan that investors in companies make more money overall than individual entrepreneurs.

This is perhaps the story to take away from The Second Bounce of the Ball by Apax founder Ronald Cohen.

"Success," like most other abstract qualities, is largely subjective. Life is for living, not ferretting around for dollars and euros. As Brian Micklethwait writes in his essay What the Success Books Say:

Success means having a success attitude. Success means thinking successfully. Success means having, or cultivating, a "positive mental attitude"

Putting aside my nerdy and maladjusted obsession with the wealthy I care more about living elegantly and happily than mere money.

What I'm reading now

• M150 Data, Computing and Information: Unit 5 Storing, getting and sending your data, OU.


• T173 Block 3 Patents: The engineer as innovator, OU.


• The Quark and the Jaguar: Adventures in the Simple and the Complex by Murray Gell-Mann.


• Sams Teach Yourself Java 6 in 21 Days by Rogers Cadenhead and Laura Lemay.


• Economics for Dummies by Sean Masaki.


• Four Laws That Drive the Universe by Peter Atkins.

I recently (and finally) finished reading Arthur Koestler’s The Sleepwalkers. It was referenced in The Black Swan by Nassim Nicholas Taleb.

Taleb said that Koestler highlighted how the idea that science has progressed in a straightforward fashion is wrong. Science has evolved through a series of sudden breakthroughs, and with much time wasted in intellectual dead-ends.

Taleb describes the most valuable property of the scientific method and the free market as “stochastic tinkering.” Having lots of people messing around with different ideas and business models increases your exposure to potential breakthroughs.

The idea that history is a series of clear and well defined developments inevitably leading to some outcome is a canard. History is a random and chaotic process.

Science and the free market are also random and chaotic. However it is precisely because of this randomness that science and the free market are so powerful.

Because the free market encourages new ideas and methods and allows successful ideas to achieve success at the expense of less successful ideas the ultimate outcome is a system that maximises the potential for good ideas to achieve widespread adoption.

Similarly with science. Good ideas succeed at the expense of bad ones. However in the scientific method the ideas are judged on the basis of the successful predictions they make, or the fact that they have yet to be disproved by experiment.

In the free market good ideas are judged on the basis of how profitable they are (theoretically).

Gell-Mann touches on many of the same ideas as Taleb, particularly regarding complexity and what Gell-Mann refers to as “complex adaptive systems.”

Black swans and newspapers

Currently reading The Black Swan by Nassim Nicholas Taleb. Pretty good. One personal point hits home though: why the hell do I read so many newspapers? Why does anyone?

The stock answer is "to be informed" - which is a bunch of bull. Not only does Taleb show how reading newspapers actually makes you less knowledgeable about what goes on in the world he also points out that newspapers are so full of misery and negativity there is little value in them even as a form of entertainment.

Much better to read a good book - which I'm just off to do right now.

Thoughts on "The Black Swan"

Having read "The Black Swan" by Nassim Nicholas Taleb (his website is here) I have come to a few conclusions:

1. I spend too much time reading newspapers and on trivial and timewasting exercising (writing this blog post does not qualify as it counts as practice in writing and helps me organise my thoughts).
2. Much of what I believe about the world isn't based on any kind of objective reality, but rather a collection of superstitions, cognitive biases[link], and predjudices.
   
3. In certain non-empirical fields there is little value in deferring to experts if your intention is to accomplish something (like building a bridge, or making money).
4. The value in the "free market" has less to do with competition and more to do with the resultant levels of "stochastic tinkering" that have the potential to lead to hugely influential but unpredicted developments.
   

The Book Itself

Taleb is arrogant, irreverent and amusing - all qualities I value in anyone. He writes engagingly, occasionally dipping into anecdote (for illustrative purposes, not necessarily to support his argument).

The Black Swan

A Black Swan is an unpredicted event that has a huge impact. Human beings tend to ignore Black Swan events when making decisions about the future, despite the fact that Black Swans tend to have an overwhelming effect in history, science, business, finance, and individual lives.

Black Swan events are outliers, they have an extreme impact, and third human nature has the tendency to attempt to "explain" the Black Swan after the fact, making it seem predictable and obvious.

Extremistan and Mediocristan

Taleb defines two areas of human experience: in Mediocristan things tend to behave in a fairly orderly and predictable manner. The distributions of height in a large population, for example, remain relatively close to a normal Gaussian bell curve even if you were to add the world's tallest man to the population - because he is not 3 kilometres tall he does not effect the overall distribution.

In Extremistan, on the other hand, outliers have a disproportionately large effect. The distributions of personal net worth in a large population, for example, will be completely thrown out of whack if you add Bill Gates to the population.

Power Laws and Guassian Bell Curves

In Extremistan, power laws (Pareto's Principle, Zipf's Law) and fractal relationships are the norm. In Mediocristan Guassian bell curves are the norm.

Taleb believes the bell curve is misused in it's application in investing (I wasn't aware the bell curve was used extensively in finance).

Scalable and Non-Scalable Professions

Inequality tends to follow a power law. The richest 1% own 50% of all assets, whereas the poorest 10% own substantially less than 10% of all assets.

With regard to income some professions lend themselves to black swans and power laws, and others don't. Medical doctors and priests will tend to earn roughly a certain amount, which will fall somewhere on the bell curve of income for that particular profession.

Writers, venture capitalists, entrepreneurs, and scientists, on the other hand, all occupy extremistan, or black swan territory. Some writers (like J.K. Rowling or Terry Pratchet) earn collossal amounts of money per hour worked whereas the vast majority will struggle to earn anything.

Empiricism and the Problem of Induction

How do we know that what happens in the past will continue to happen in the future? Taleb likes empirical philosophers like Francis Bacon and Karl Popper, and Sextus the Empirical. In trying to find knowledge about the world it is better to prove conclusively that something doesn't work than that it does - in fact you can't prove that something always works.

Knowledge, therefore, emerges from negatives. Disproving something adds to knowledge.

Platonism and Theories

Taleb rails against creating a theory and then selecting evidence to fit the theory. He dislikes the application of game theory to economics, and portfolio theory to investment. He describes the mistake of focusing on elegant, tractable mathematics at the expense of empirical knowledge as platonicity, and any knowledge divined from such abstract mathematical theorising is "nerd knowledge."

Cognitive Bias and the Narrative Fallacy

Correlation does not equal causation. Post hoc ergo propter hoc.

Terry Pratchett and Taleb

Pratchett comments extensively on the human desire to create stories (the Discworld is a world that runs on narrative, rather than physical laws) and on the fact that million-to-one chances occure nine times out of ten.

Also Pratchett's uber-politician Lord Vetinari is the embodiment of the knowledge that in an unpredictable world what people really, really want is for tomorrow to be pretty much the same as today.

Arthur Koestler and Taleb

Skimming through The Sleepwalkers by Arthur Koestler (which I have read) I can see many parallels between Taleb's dislike of platonism and Koestler's similar criticism of excessive theorising in physics.

Taleb refers to Koestler's book in The Black Swan in the context of the inadvertant nature of much scientific discovery.

Koestler was also intensely critical of the dogmatic nature of theoretical physics (as he perceived it). Koestler's problem was that, unlike classical physics, quantum electrodynamics involved fields and quanta that could be one or the other or something else, depending on your perspective. I personally think the problem is more to do with the fact that QED is counter-intuitive. We humans have evolved in a quasi-classical environment and just aren't set up for thinking in terms of the quantum environment of the very small.

Hayek and Stochastic Tinkering

Taleb believes the value in free markets lies in their ability to generate new idea in a process of stochastic tinkering. This apparently is what Hayek thought.

Taleb is also a fan of Francis Bacon and Karl Popper. Does not like Platonism - mistaking the map for the territory and overextending the use of models.

Whither singularity?

Both Kurzweil and Taleb are obsessed with the fact that humans tend to have an "intuitive-linear perspective."

Taleb doesn't comment on the singularity directly. He does refer to the importance of power laws and such.

Conclusions

There is a lot of food for thought in this book, and I intend to read a lot more about the various topics that Taleb raises.

As ever at this stage in my education any new knowledge raises more questions and than it answers.

However as Taleb's central point is that the world is in many ways fundamentally unknowable and unpredictable perhaps this is a good thing.

The objective of learning is not simply to know a load of facts, but rather to become comfortable with the limits of your understanding. To transform unknown unknowns into known unknowns and to cope as best you can with those things that remain unknown unknowns.

Discussion of ethics, capitalism, the environment, and what I should do with my life

I have been reading The Business by Iain Banks. It is an engaging read, despite the treacle-slow plot, and has plenty of the kind of feats of imagination that I like about Banks’ writing.

The main protagonist is a mid-to-high-level manager in “the business” – a generation-spanning organisation that supposedly bought the Roman Empire (but only for 66 days), owns several sets of crown jewels, and is as ubiquitous as it is unnoticed.

The internal set-up of the business is explored in some detail; it is vehemently rationalist, secular, meritocratic, and organised to avoid corruption, nepotism, and dynasty-building as these things are seen to get in the way of effective money-making.

As ever Banks’ imagination and prose add a great deal to the story, and his politics shines through as clearly as usual. Several pages are given over to debates about inequality, opportunity, capitalism, and the pros and cons of free markets and the state.

I am currently at 312/392 pages. I don’t know if there will be a twist at the end or not, but the book has already given me food for thought on a subject that has been worrying me for some time now.

I am currently 19 years old and in the very fortunate position of being able to choose how, where, and in what manner I wish to live my life. This is not a choice most people are offered. As such, I have been vacillating over the appropriate direction to take. Do I want to dedicate my life to the service of some greater good, or do I want to pursue my own aims and personal ambitions?

Reading A.C. Grayling’s The Choice of Hercules: Pleasure, Duty, and the Good Life in the 21st Century has helped a little. In the book Grayling argues that the idea that we have to choose whether to devote our lives to vice or virtue is a false one. At the same time H.J. Blackham’s Humanism suggests that I have a responsibility to myself, and a responsibility to everyone else by virtue of our common experience of humanity. Balancing the two is addressed by Grayling quite well in his book.

In any case the real cause of my concern over what path to take stems from the ideas explored in The Business. Is acquisitiveness good? Is greed good? Is it better to seek to grow and expand your wealth or persue other interests entirely?

Quite often this argument is subsumed by other arguments about capitalism vs. socialism; of free markets vs. state control; traditional morality vs. human nature; and arguments over the best way to raise people out of poverty and end tyranny and bloodshed.

These kind of political, economic and social arguments devolve to deciding whether or not our current system of liberal democratic capitalism (as typified by the USA, Japan, and the EU) is the best resource/scarcity-allocating system.

The definition of “best” is open for debate as well. Anyone asking for my beliefs on what is best should read the Universal Declaration of Human Rights, then read up on utilitarian philosophy and the golden rule. For the purposes of the rest of this essay I will assume “best” means that all resources are allocated in a manner which leads to an ending of human poverty ASAP, an ending to war, and provision for ensuring sustainable use of finite resources (read: avoiding anthropogenic climate change, preserving and enhancing biodiversity, repairing some of the damage we have already done to the environment and ensuring that in the long run human activity has a neutral effect on the environment).

This is a tall order for any prospective resource-allocation system, but I am confident it can be accomplished. The best book I’ve read on the subject of ensuring continuing and growing prosperity for all whilst maintaining the environment is The Meaning of the 21st Century: A Vital Blueprint for Ensuring Our Future by James Martin. In the book Martin argues for something called “eco-affluence.” Martin believes that with a combination of freer markets, more education (especially for women), and advanced technologies (most notably extensive use of genetic engineering, nuclear power, and hydroponics) we will be able to simultaneously solve our environmental and humanitarian problems. He makes an excellent case for the fact that they are one and the same problem, and that attempting to solve one whilst disregarding the other will end up exacerbating both.

From an objective perspective it is clear that if a better resource/scarcity-allocating system than liberal democratic capitalism ever emerged then we should immediately adopt it. Some might point to China’s model of state capitalism as an alternative solution, but they miss the point that what matters is quality of life. Most evidence suggests dictatorships are simply institutionally incapable of behaving in a benign manner.

Can you do good simply by aiming to become rich? You create jobs, you increase public tax revenues and hence the amount of money spent on welfare, hospitals, schools, etc. If you do it properly you create an environmentally sustainable business that provides people with a good service. You will probably have a lot of fun once you acquire wealth and then you can give it all away before you die.

There are a couple of ways of looking at problems in the world. One argument would be to say that the problem is corporatism. Whenever the needs and desires of an abstract collective are put above the needs and desires of individuals you get problems. An example that springs to mind is that of environmentalism. Environmentalists have an unfortunate habit of treating people as “the problem” rather than the only reason it is worth solving the problem.

In The Business “the Business” is a mechanism for allowing the flourishing of individuals – or is it a controlling corporate regime?

John Marnard Keynes, the economist whose theories of fiscal stimulus are currently being implemented by our politicians saw capitalism as a means to an end, a multi-generational project for creating wealth, growth, and technological innovation. His concept of capitalism was that it is a necessary evil; a mechanism for creating a greater good.
In his essay The Economic Possibilities of Our Grandchildren Keynes writes that:

The strenuous purposeful money-makers may carry all of us along with them into the lap of economic abundance. But it will be those peoples, who can keep alive, and cultivate into a fuller perfection, the art of life itself and do not sell themselves for the means of life, who will be able to enjoy the abundance when it comes.

It could be said that Keynes is too utopian – and that he doesn’t realise that humanity is inherently acquisitive and irrational. Maybe markets emerge naturally in all human societies?

To return to Iain Banks – A Few Notes on the Culture is well worth reading on the subject of what (I hope) a post-scarcity civilisation looks like.

And also (via Ken MacLeod) this libertarian commentary on the idea of "success" from Brian Micklethwait.

And finally, because this is a blog after all, what about me? What should I do? Start a business? Go study bioinformatics? Go study economics? Go study systems engineering? Write novels?

10, 000 hours

I am obsessed with talent, intelligence, achievement, and success.

Not, you must understand, in the sense that I am talented, or that I strive daily to succeed, but rather in the sense that I am obsessed with the lives, opinions, and achievements of those who are talented, intelligent, and successful.

I'm a sucker for books like How to Get Rich by Felix Dennis; I love reading the entrepreneur profiles in The FT; I know the top ten of the Sunday Times Rich List off by heart.

I am, in fact, a wealth nerd. I have an unhealthy obsession with the rich and filthy rich.


This isn't an aspect of my personality I'm particularly proud of - but it's there and it isn't going away.

In a broader sense I am interested in those who are successful in all areas, like science fiction writing or economics.

But my main concern is money: what is it about these people that allows them to acquire so much more of the stuff than everyone else?

Malcolm Gladwell's latest book Outliers: The Story of Success sets out to answer that question. I enjoyed Gladwell's previous book, Blink: The Power of Thinking without Thinking; but I did feel that it felt more like a collection of essays with a common theme than a cohesive argument (viz people analyse facts and make decisions very, very quickly - in the blink of an eye).

The Guardian has published an excerpt from Outliers that I advise you all go and read:

What we think of as talent is actually a complicated combination of ability, opportunity and utterly arbitrary advantage.

...

(((of a study by K Anders Ericsson of three groups of violin students)))

By the age of 20, the elite performers had all totalled 10,000 hours of practice over the course of their lives. The merely good students had totalled, by contrast, 8,000 hours, and the future music teachers just over 4,000 hours.

The curious thing about Ericsson's study is that he and his colleagues couldn't find any "naturals" - musicians who could float effortlessly to the top while practising a fraction of the time that their peers did. Nor could they find "grinds", people who worked harder than everyone else and yet just didn't have what it takes to break into the top ranks.

Their research suggested that once you have enough ability to get into a top music school, the thing that distinguishes one performer from another is how hard he or she works. That's it. What's more, the people at the very top don't just work much harder than everyone else. They work much, much harder.

This, to me, is an interesting and crucial observation. Gladwell isn't necessarily saying "everyone can do it" but rather only those capable (either by genetic predisposition, the manner in which they are raised, or the circumstances of their lives) of practicing the requisite 10, 000 hours in order to become an expert.

I look forward to reading the complete book, and of finding out if this is a universal component of success.

One of my bugbears is my mathematical ability. I have several friends who are simply better that I at maths (solving differential equations, set theory, number theory, discrete maths, integral equations, geometry etc).

However if I were to spend 10, 000 hours doing differential equations would I becomean expert? Probably. Would I ever achieve the intuitive brilliance of Newton or Einstein?

I doubt it.

Two Interviews, Two Perspectives

Just read a couple of interesting interviews, one with Mark Zuckerberg (founder of Facebook) and Malcolm Gladwell (author of Blink: The Power of Thinking without Thinking, and Outliers: The Story of Success).

I feel sorry for Zuckerberg: he sounds like he's being coached and handled. From my point of view becoming that wealthy that early on is pointless. You want to be young and wild before you become middle aged and rich.

From the interview:

Zuckerberg has expanded Facebook to the point where it is among the fastest-growing websites in the history of the internet, but he says the principal mission is the same: sharing.

(((the bait)))

In fact, he uses the word so many times that I wonder if I am talking to a machine. 'The idea was always, tell people, "share more information",' he tells me. 'And that way we could gain more understanding about what's going on with the people around you.'

(((the switch)))

Paul Carr, leading journalistic groupie of the Web2.0 business boom, comments on the nature of success in social networking in his recent book Bringing Nothing to the Party: The True Story of a New Media Whore.

Carr points out that Mark Zuckerberg and Larry Page and Sergey Brin and Tom Anderson and the rest of the [successful] Web2.0 crowd are doomed to a life controlled by minders and advisors, where any and every casual remark could potentially lead to a lawsuit or cause the share price of their company to plummet.

I identify with Malcolm Gladwell quite a lot. Not just because he has a tight 'fro, but also because he is similarly obsessed with the idea of success, his relationship status, his interest in academia whilst not actually being of academia:

Meeting the limits of his own dedication had a formative effect on Gladwell. He has subsequently become preoccupied in his writing with people who would go to greater lengths even than he would to achieve something.

...

'I don't believe in character,' he says. 'I believe in the effect of the immediate impact of environment and situation on people's behaviour.'

...

He smiles. 'I have lived with people, though not formally,' he says. And: 'I'm just slow at getting around to things. I am aware of writing about parents' subjects - education and so on - without actually being a parent. I write a lot about kids. It allows me to make all kinds of pronouncements without being confused by actual experience. The other way to think about it is as a rehearsal. It is a way of sorting through those choices before you get there...'

It looks to be a good book. I will read it, and comment on it, then move on.