An interesting excerpt from MR:
Until more people come to a more realistic, fact-based understanding of the government and the economy, little hope exists of tearing them away from their quasi-religious attachment to a government they view with misplaced reverence and unrealistic hopes. Lacking a true religious faith yet craving one, many Americans have turned to the state as a substitute god, endowed with the divine omnipotence required to shower the public with something for nothing in every department – free health care, free retirement security, free protection from hazardous consumer products and workplace accidents, free protection from the Islamic maniacs the U.S. government stirs up with its misadventures in the Muslim world, and so forth. If you take the government to be Santa Claus, you naturally want every day to be Christmas; and the bigger the Santa, the bigger his sack of goodies.
For fun, let's substitute some words:
Until more people come to a more realistic, fact-based understanding of the market and the economy, little hope exists of tearing them away from their quasi-religious attachment to a market they view with misplaced reverence and unrealistic hopes. Lacking a true religious faith yet craving one, many Americans have turned to the market as a substitute god, endowed with the divine omnipotence required to shower the public with something for nothing in every department – efficient health care, efficient retirement security, efficient protection from hazardous consumer products and workplace accidents, efficient protection from the Islamic maniacs the U.S. market stirs up with its misadventures in the Muslim world using prediction markets, and so forth. If you take the market to be Santa Claus, you naturally want every day to be Christmas; and the bigger the Santa, the bigger his sack of goodies.
Saturday, October 17, 2009
Thursday, October 15, 2009
What I've been reading
1. Little Children by Tom Perrotta: Very well crafted caricature of suburban life and very New Yorker-ish.
My definition of New Yorker-ish is at the end when "a bug crawls across the window" as the protagonist looks at it and "suddenly" the protagonists understands, e.g. (spoiler alert!):
But what he suddenly understood - it seemed so obvious now as if the truth had been jarred loose when his body hit the pavement - was that he'd never actually wanted to start a new life n the first place. (pg. 314)
Sarah smelled chocolate on Lucy's breath as she leaned forward to plant a soft kiss on the tip of her cute little nose. A vision came to her as her lips touched Lucy's skin, a sudden vivid awareness of the life they'd lead together from here on out, the hothouse intimacy of a single mother and her only child, the two of them sharing everything, breathing the same air, inflicting their moods on each other, best friends and bitter rivals, competing for attention, relying on each other for companionship, and probably unhealthy bond that for better and worse would become the center of both their identities ... (pg. 317)
2. Insanely Great by Steve Levy: An enjoyable read about the Macintosh.
3. Accidental Empires by Robert Cringely. Spectacularly wrong on the future of RISC chips and the demise of Steve Jobs -- all with the benefit of hindsight of course.
4. Gates: How Microsoft's Mogul Reinvented an Industy and Made Himslef the Richest Man in America by Stephen Manes and Paul Andrews. A little choppy as it made little leaps forward and backward in time but in the end even with all the details about Gates' life there is very little insight on how Microsoft really works. Yes, they are reactive to the market, i.e. see a product that has become popular and then try to make their own version better but left unexplained is how they do it e.g. spec design, etc. from a software designer's perspective. In a way it was very much like this Intel book.
What is also interesting is that all its competitors in the book: Borland, WordPerfect, Ashton-Tate are no longer around.
Also given Gates' propensity for being cheap - it tells of a story of how Gates at his height was hunting for a 50 cent coupon for ice cream and holding up the entire check out line - and his rule on only flying coach, why would Microsoft spend so extravagantly on software rollout events and Comdex parties? This question nagged at me throughout the book.
The only thing I'll quote is at the end:
"One thing economists are not good at is measuring productivity ... The output is not defined it's changing every time, and so the comparison is bogus." Was a business letter with five fancy fonts and a pie chart a more productive output than a dull typewritten sheet of text? Not even software could give a clear answer. (pg. 455)
5. The Roaring 80's by Adam Smith. This book is like a series of blog entries and random thoughts - very disjointed and unfocused and ended up skimming most of it. Was surprised to learn the following (pg. 26):
"What did you expect?" (Adam Smith asks Volcker about the change in policy to control inflation.)
"A better impact on public psychology and economic performance and a prompter effect in lowering interst rates and inflation expectations. You expected interest rates to go up in the aftermath, but I was so naive as to hope short-term interest rates alone would go higher. You would have had a great success if long-term rates didn't go up very much, or went up and came down again. But it didn't happen. Rates went up and stayed all the way along the line." .....
"Did you expect interest rates to go as high as they did?" I asked.
"No, I certainly didn't expect them to got to twenty-one percent."
"What did you expect?"
"That - twenty-one percent - would have been out of the ball park. The other thing that surprised you during that period - 1979 and the winter of 1980 - was that the assembled economic wisdom said we were on the edge of a recession, if not in one. Instead, with interest rates going up, and things getting tighter, the economy kept expanding. When you were guessing what interest rates might be, you wouldn't have assumed that the economy would be as strong as it was."
"Did you feel uneasy as you saw the rates go from twelve to fourteen to sixteen to eighteen percent?"
"Uneasy? The uneasiness over interest rates was moderated by the lack of evidence that the economy was collapsing. Inflation was getting worse - inflation of eighteen percent and interest rates at eighteen percent are in context - you had a higher inflation rate and a stronger economy."
"Did you expect that it would produce a recession?"
"No. Nobody realized it at the time, but the recession was created by credit controls. ... "
"If you had it to do over again, what would you do?"
"I wouldn't do credit controls, that's for sure. I went along with it but it was the administration's idea - Carters. ..."
The subsequent recession and the rise and then fall of interest rates moderated inflation and here Volcker held firm according to Adam Smith's account until July 1982 when he decided to ease monteary policy.
Always was under the impression that Volcker and the Fed knew what they were doing.
My definition of New Yorker-ish is at the end when "a bug crawls across the window" as the protagonist looks at it and "suddenly" the protagonists understands, e.g. (spoiler alert!):
But what he suddenly understood - it seemed so obvious now as if the truth had been jarred loose when his body hit the pavement - was that he'd never actually wanted to start a new life n the first place. (pg. 314)
Sarah smelled chocolate on Lucy's breath as she leaned forward to plant a soft kiss on the tip of her cute little nose. A vision came to her as her lips touched Lucy's skin, a sudden vivid awareness of the life they'd lead together from here on out, the hothouse intimacy of a single mother and her only child, the two of them sharing everything, breathing the same air, inflicting their moods on each other, best friends and bitter rivals, competing for attention, relying on each other for companionship, and probably unhealthy bond that for better and worse would become the center of both their identities ... (pg. 317)
2. Insanely Great by Steve Levy: An enjoyable read about the Macintosh.
3. Accidental Empires by Robert Cringely. Spectacularly wrong on the future of RISC chips and the demise of Steve Jobs -- all with the benefit of hindsight of course.
4. Gates: How Microsoft's Mogul Reinvented an Industy and Made Himslef the Richest Man in America by Stephen Manes and Paul Andrews. A little choppy as it made little leaps forward and backward in time but in the end even with all the details about Gates' life there is very little insight on how Microsoft really works. Yes, they are reactive to the market, i.e. see a product that has become popular and then try to make their own version better but left unexplained is how they do it e.g. spec design, etc. from a software designer's perspective. In a way it was very much like this Intel book.
What is also interesting is that all its competitors in the book: Borland, WordPerfect, Ashton-Tate are no longer around.
Also given Gates' propensity for being cheap - it tells of a story of how Gates at his height was hunting for a 50 cent coupon for ice cream and holding up the entire check out line - and his rule on only flying coach, why would Microsoft spend so extravagantly on software rollout events and Comdex parties? This question nagged at me throughout the book.
The only thing I'll quote is at the end:
"One thing economists are not good at is measuring productivity ... The output is not defined it's changing every time, and so the comparison is bogus." Was a business letter with five fancy fonts and a pie chart a more productive output than a dull typewritten sheet of text? Not even software could give a clear answer. (pg. 455)
5. The Roaring 80's by Adam Smith. This book is like a series of blog entries and random thoughts - very disjointed and unfocused and ended up skimming most of it. Was surprised to learn the following (pg. 26):
"What did you expect?" (Adam Smith asks Volcker about the change in policy to control inflation.)
"A better impact on public psychology and economic performance and a prompter effect in lowering interst rates and inflation expectations. You expected interest rates to go up in the aftermath, but I was so naive as to hope short-term interest rates alone would go higher. You would have had a great success if long-term rates didn't go up very much, or went up and came down again. But it didn't happen. Rates went up and stayed all the way along the line." .....
"Did you expect interest rates to go as high as they did?" I asked.
"No, I certainly didn't expect them to got to twenty-one percent."
"What did you expect?"
"That - twenty-one percent - would have been out of the ball park. The other thing that surprised you during that period - 1979 and the winter of 1980 - was that the assembled economic wisdom said we were on the edge of a recession, if not in one. Instead, with interest rates going up, and things getting tighter, the economy kept expanding. When you were guessing what interest rates might be, you wouldn't have assumed that the economy would be as strong as it was."
"Did you feel uneasy as you saw the rates go from twelve to fourteen to sixteen to eighteen percent?"
"Uneasy? The uneasiness over interest rates was moderated by the lack of evidence that the economy was collapsing. Inflation was getting worse - inflation of eighteen percent and interest rates at eighteen percent are in context - you had a higher inflation rate and a stronger economy."
"Did you expect that it would produce a recession?"
"No. Nobody realized it at the time, but the recession was created by credit controls. ... "
"If you had it to do over again, what would you do?"
"I wouldn't do credit controls, that's for sure. I went along with it but it was the administration's idea - Carters. ..."
The subsequent recession and the rise and then fall of interest rates moderated inflation and here Volcker held firm according to Adam Smith's account until July 1982 when he decided to ease monteary policy.
Always was under the impression that Volcker and the Fed knew what they were doing.
Update on signs of fiscal stimulus
In an old post I noted that there were signs of fiscal stimulus in Washington DC. The work now seems to be complete or as I see it very incomplete. Except for upgrading street lamps on Dalecarlia Parkway, very little else seems to have been done that I thought needed doing - repaving and regrading to improve drainage.
I suppose this is a two edged sword - that fiscal stimulus really is ineffective or it is ineffective because not enough funds were allocated to the stimulus.
I suppose this is a two edged sword - that fiscal stimulus really is ineffective or it is ineffective because not enough funds were allocated to the stimulus.
Experimental economics
I always thought that results from experimental economics did not generalize and now I find that this is true. From Tim Harford:
There is the “ultimatum” game, in which player A (Anna) is given $10 and asked how much, if any, she proposes to offer to player B (Bernard). Bernard can accept the offer, but if he rejects it, neither Anna nor Bernard get anything. If Anna and Bernard were rational income-maximisers, Anna would offer one cent and Bernard would accept it as better than nothing. This never happens, so Anna and Bernard are not rational income-maximisers.
Then there is the “dictator” game, introduced by Jack Knetsch, the Nobel laureate Daniel Kahneman and Richard Thaler, co-author of Nudge and perhaps the world’s leading behavioural economist. In the “dictator” game, Anna divides the $10 as before, but Bernard cannot reject her offer, so Anna can’t lose. Nevertheless, Anna will often throw Bernard two or three dollars. A third game, “gift exchange”, begins with Bernard offering Anna a payment. Anna then decides how to respond – effectively, an initial peace offering followed by “dictator”.
The results are astonishingly consistent: these games seem to demonstrate a taste for fairness. People offer more than they have to, reject unequal offers and reciprocate generosity. This has been a thorn in the side of conventional economics for more than 20 years.
List’s contribution ... has been to show that these results stem from the experimental set-up. In one set of experiments, he gently varied the rules of “dictator”. Anna, in addition to dividing up the $10 between herself and Bernard, was given the option to take a further dollar from Bernard. This option should be irrelevant. Because most Annas offer money to Bernard, they should hardly be tempted to pick his pocket. But in fact, when offered the chance to take money, far fewer Annas decide to give Bernard anything and one in five actually took Bernard’s dollar. Another experiment showed that Anna’s willingness to take from Bernard was dramatically less if she thought Bernard had earned his money. As the experimenter, List found he could nudge his subjects into being generous or mean with small variants in the set-up.
There is the “ultimatum” game, in which player A (Anna) is given $10 and asked how much, if any, she proposes to offer to player B (Bernard). Bernard can accept the offer, but if he rejects it, neither Anna nor Bernard get anything. If Anna and Bernard were rational income-maximisers, Anna would offer one cent and Bernard would accept it as better than nothing. This never happens, so Anna and Bernard are not rational income-maximisers.
Then there is the “dictator” game, introduced by Jack Knetsch, the Nobel laureate Daniel Kahneman and Richard Thaler, co-author of Nudge and perhaps the world’s leading behavioural economist. In the “dictator” game, Anna divides the $10 as before, but Bernard cannot reject her offer, so Anna can’t lose. Nevertheless, Anna will often throw Bernard two or three dollars. A third game, “gift exchange”, begins with Bernard offering Anna a payment. Anna then decides how to respond – effectively, an initial peace offering followed by “dictator”.
The results are astonishingly consistent: these games seem to demonstrate a taste for fairness. People offer more than they have to, reject unequal offers and reciprocate generosity. This has been a thorn in the side of conventional economics for more than 20 years.
List’s contribution ... has been to show that these results stem from the experimental set-up. In one set of experiments, he gently varied the rules of “dictator”. Anna, in addition to dividing up the $10 between herself and Bernard, was given the option to take a further dollar from Bernard. This option should be irrelevant. Because most Annas offer money to Bernard, they should hardly be tempted to pick his pocket. But in fact, when offered the chance to take money, far fewer Annas decide to give Bernard anything and one in five actually took Bernard’s dollar. Another experiment showed that Anna’s willingness to take from Bernard was dramatically less if she thought Bernard had earned his money. As the experimenter, List found he could nudge his subjects into being generous or mean with small variants in the set-up.
In praise of Twitter?
Tried out Twitter over the summer and I can't say that I was impressed. Received followers who were no more than "twam", i.e. Twitter spam. For instance, I noted that we were planning a trip to Hua Hin and in popped a follower offering Hua Hin deals. It was not easy to for others to follow our Tweets either - probably because we are of a different generation i.e. we did not rig our cell phones for Twitter etc.
Tyler Cowen seems impressed. Maybe I should use it the same way he does:
I am surprised how many people still think Twitter is a fad or a waste of time. I view Twitter -- or some modified future version thereof -- as everlasting. Most of all, the search function helps you tap into a real time conversation on just about any topic you want, ... Google is wonderful but it's hard to sort through the mess and figure out where the conversation is now. For sampling opinion on either movies or music, Twitter is essential, or even for researching a forthcoming blog post. Think of it as Google focused on one time-slice and giving the weight of crowd opinion no more than linear force. If an opinion is more common it will receive more tweets but otherwise your search brings up the splat, ordered by chronology, and thus it is more idiosyncratic than the first Google search page and often in a good way.
This opinion however in no way invalidates my opinion that Twitter is a fad. Whatever happened to the promise of MySpace, Friendster, etc. I still have to try out Facebook.
Tyler Cowen seems impressed. Maybe I should use it the same way he does:
I am surprised how many people still think Twitter is a fad or a waste of time. I view Twitter -- or some modified future version thereof -- as everlasting. Most of all, the search function helps you tap into a real time conversation on just about any topic you want, ... Google is wonderful but it's hard to sort through the mess and figure out where the conversation is now. For sampling opinion on either movies or music, Twitter is essential, or even for researching a forthcoming blog post. Think of it as Google focused on one time-slice and giving the weight of crowd opinion no more than linear force. If an opinion is more common it will receive more tweets but otherwise your search brings up the splat, ordered by chronology, and thus it is more idiosyncratic than the first Google search page and often in a good way.
This opinion however in no way invalidates my opinion that Twitter is a fad. Whatever happened to the promise of MySpace, Friendster, etc. I still have to try out Facebook.
Monday, October 12, 2009
Dowturns are all alike
It was not a good time [1976] to be in the car business. The Arab oil embargo was on, and interest rates were out of sight. Many of the solid, working-class Americans to whom Philip [Reed] had sold Chevrolets had been laid of and were unable to meet their ballooning credit payments. Reed had quickly discovered that repossession was not only nasty, it was unprofitable. He could recover the cars, but the real problem was selling them again. (pg. 157)
Once Upon A Time in ComputerLand, Jonathan Littman
Once Upon A Time in ComputerLand, Jonathan Littman
Two more books on defunct computer companies
1. Once Upon a Time in Computerland by Jonathan Littman documents the rise and fall of William Millard and ComputerLand. I found the narrative choppy and had a tendency to jump about rather awkwardly. Perhaps this is due to the large cast of characters and number of shell companies created but I found it hard to follow at times.
2. Startup A Silicon Valley Adventure by Jerry Kaplan was an entertaining read from the founder of GO Corp. Kaplan's a pretty good writer full of aphorisms, e.g.:
Making a business deal is like having sex: the more people are involved, the more difficult it is to consummate. (pg. 206)
2. Startup A Silicon Valley Adventure by Jerry Kaplan was an entertaining read from the founder of GO Corp. Kaplan's a pretty good writer full of aphorisms, e.g.:
Making a business deal is like having sex: the more people are involved, the more difficult it is to consummate. (pg. 206)
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