The one-handed economist

Donald Trump is not just bankrupt as a moral leader coward. He’s also wildly corrupt, in terms of enriching himself at a vast cost to the country. (By vast, I mean that he’s willing to give up $billions of US wealth to get himself $thousands in golf courses or deals for his daughter.)

Republicans have allowed for this behavior because it ain’t their money and voters seem to think Don and the Replicants are on their side. That’s crazy wrong. (Just tonight I had to clarify how little of Obama’s economic growth Donnie can claim as his own. I’d say negative, given his attacks on trade, migration and American alliances.)

Anyway, the Replicants are selfish cowards who care nothing about the Constitution (let alone God), but business people are not in the same class. They will act because their money is at risk. For example:

The Economist: “Amazon confirmed that it will appeal against the Pentagon’s decision to award a $10bn cloud-computing contract to Microsoft. Amazon had been favourite to win the contract, before Donald Trump, who has kept up a public feud with Jeff Bezos, the company’s boss, suggested it should go elsewhere. Amazon says that procurements should be administered “objectively” and “free from political influence”. Mark Esper, the defence secretary, said the process had been fair.”

My one-handed conclusion is that Trump is toast as soon as he starts to cost people real money. Let’s see if he can avoid tanking the economy (or powerful businesses) before the election. (I think he should be impeached, of course, but that won’t happen while Replicants are insulated from voter anger.)

Visionaries, consultants and public speakers love to explain how they are embracing distribution over decentralization over centralization, using an image like this:

What drives me crazy about this image is that it actually undersells true decentralization, i.e., when everyone is connected to everyone:

We already have such systems for email (anyone on Earth can connect with anyone else without going through a censor, “chokepoint,” or authority), and cryptocurrencies offer the same connectivity for money.

Note that mobile phones are not decentralized because they need to be connected to carriers, which also means that mobile phone apps for messaging and payment are not decentralized. (I can’t install WePay on my phone, for example, because it’s not approved for the EU.)

These distinctions are important to people who support freedom of action, belief and existence — freedoms that are under assault in Hong Kong, Iran, China, and even the US (due to monopoly concentrations and government attempts to control private conversation).

Thus, we need to avoid debating “decentralization” within an Overton window preferred by authorities and would-be-monopolies. Those parties are happy with figures B and C because they can be monitored and controlled via critical nodes such as influencers, service providers, or content owners.

My one-handed conclusion is that citizens should insist on real decentralization. Choose D.

H/T to CD

Economists say competition in markets rages from “perfect” (no company can charge a price over cost without losing 100% of its customers to another company) to “monopoly” (one company sets prices to maximize profits).

Two caveats are important. First, the monopolist doesn’t charge as much as possible but whatever maximizes profits. There might be a lot of trading going on, but also a lot of missing trades. Second, businesses seek monopoly power in different ways, from having a unique product with zero substitutes (pretty rare) to being open for business at a certain time and place (pretty common). Businesses often try to create monopoly power by making it hard to compare products with competitors or across boundaries. That’s why they sell the same razor in pink for women and blue for men, change model numbers for the same product in different markets, change package sizes, and so on.

Thus, businesses make it harder to see similarities and differences because confusion for you means larger profits for them.

Flipping this idea over, businesses want to identify similarities and differences among customers to make it easier to charge different prices to different customers. Their goal is not to charge as much as the market will bear but as much as you will bear.

Thus, businesses “price discriminate” (PD) in a quest to get $4 from you and $6 from me for the same product.  There are three types of PD, arranged from easiest to hardest to implement:

• “Third degree PD means charging a different price to different consumer groups,” e.g., young vs old or lunch vs dinner.
• “Second-degree PD means pricing according to quantity demanded, e.g., larger quantities are available at a lower unit price.”
• “First degree PD means (FDPD) charging the maximum price each consumer is willing to pay.”

There are many examples of second and third degree PD, but FDPD is harder to pursue. In the past, we got close to FDPD with auctions in which the highest bidder won the good, but auctions take time and still leave money on the table (the winner only needs to outbid the second place bidder).

Now the technology exists to allow routine and widespread FDPD. That technology has arrived with “big data,” and it’s not your friend.

Why?

• Our social media habits reveal our likes, choices, and friends
• Our social graph links us to friends and relatives, allowing data to be cross-checked and refined with weak or strong links to the people around us.
• Our loyalty cards, credit cards, and credit scores can be used to understand our ability- and willingness-to-pay
• Our phones track everywhere we go.
• Personal fitness devices record our heart-rates, stepping speed, etc.
• Data brokers can cheaply buy and combine many datasets and use machine learning (AIs) to create our “digital twins.” Twins may not be too accurate when they are born (here’s one effort), but your actions are constantly being compared to your twin’s predicted action. With time, your twin will will know you better than you do.

Taken together, Big Data means that you will be paying more and getting less for many goods and services. At its most-dystopian extreme, Big Data will direct you to friends, work and romance based on business profit-maximization instead of your own ideals of happiness.

My one-handed conclusion is that big data is more of a curse than a blessing for the average human.

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NB: I’ve blogged for years on the weaknesses and threats of social media, but this post also draws on my 25 years of experience in working with data and the many ways we abuse data.

The title of this post refers to how some whites refer to successful blacks in the US. (They also bomb, lynch and imprison those blacks.) The gendered-version of this slander is “putting women in their place.” When it comes to the poor, the rich say they should “pull themselves up by their bootstraps.” The young? Some oldies complain about “kids these days.”

In all of these cases, the better-off complainer ignores their social and historical privilege. They rarely consider how the economic, social, political institutions created by their ancestors have put them firmly at the top end of a tilted playing field.

So the relative improvement in the lives of racial/ethnic minorities, women, the poor, and the young upset the privileged, the most prominent group of which is composed of old white rich men, who I’ll label “Donnies.”

The Donnies don’t like uppity people invading their world, so they lash out.

“Ethnics” invade Donny pools, restaurants, and professions. Even worse, they marry their women and move to their neighborhoods.

Women are doing better in school (now that they can attend), taking Donny jobs, making more money than Donny, and even (!) deciding they don’t need to trade their womb for Donny’s money. Donnies are mad, so they accuse women of having sex or being ugly — as if that will fix Donny’s bad grades, low earnings or lack of sex appeal.

Donnies hate it when the poor succeed, calling them “nouveaux riches.” Many Donnies owe their wealth to colonial pillage, family, or social networks that allow stupid Donnies to collect outrageous salaries (I went to school with many of them). Donnies caught lying and stealing don’t often face punishment, but the poor do [pdf].

The young? Donnies tell them to respect their elders when all there is to respect is wrinkles and hair loss. In the distant past, respect made sense, but old people today probably owe their longevity to medical science, welfare systems and professional carers.

A few years ago, Barack Obama was castigated for saying that business owners “didn’t build that” without outside help. Although business owners work hard, Obama was right to call attention to the enabling environment that made their success possible. Many Donnies take those institutions for granted. Others (like the Criminal-in-Chief) take advantage of the system. In my experience, I’d say that about 80 percent of these Donnies would break down in tears if they faced the business-climate of China, Mexico or Thailand. They wouldn’t even last a day in Argentina, Egypt or India.

My one-handed conclusion: The Donnies of this world are getting upset as they realize how Others are earning the success they never did.

The Dutch are fond of subsidies for arts, sustainability and… innovation.

These subsidies arise when bureaucrats with “topical portfolios” award cash to winners of various “promise to stimulate [topic]” contests.

On the one hand, I am pleased to see the government providing public goods, i.e., stimulating efforts to help everyone.

On the other hand, these programs tend to find the least-productive incentives to advance the “topic”

(My one-handed view is that this structure is wrong… keep reading…)

So the irony is that the bureaucracy in charge of innovation…

• …has permanent employment contracts and long vacations;
• …gains nothing from success but loses nothing from failure;
• …works in non-market areas where the lack of objective measures of performance leads to subjective choices of winners and losers; and
• …happily spews a meaningless whirlpool of jargon borrowed from strategic plans, conference videos, and social media #buzzwords.

If I was in charge of these topics, I would follow the new development model of “pay for results” by specifying the criteria for success and then rewarding the most successful efforts to reach those goals with cash and publicity.

This system would have nothing to say about who did the work, what angle they took, or how fancy their method. It would pay for results. 

My one-handed conclusion is that governments should stop chasing “creative,” “innovative,” “smart,” or “sustainable” and just reward results. 

What’s your experience on this topic?