I was glad I did.
Harford’s books fall into the space between Malcolm Gladwell and Nassim Taleb, as he’s both an economist and journalist, and that’s where I like to hang out. (Fun fact, this book came out before Taleb’s 2012 Anti-fragile, which covers, AFAIK, the same topic.)
This book’s premise is that we can hardly hope to get it right the first time, especially when exploring new ideas or facing new challenges, so he says we should focus on adaptation, which is useful for dealing with climate change but also to any other change.
The way to do this is summarized as the Palchinsky Principles*:
- Seek out new ideas and try new things.
- Try new things on a small scale, so failure is survivable.
- Seek feedback and learn from mistakes as you go.
You can stop reading here, as that’s “the lesson,” but I will (as usual) add a bunch of notes (only a fraction of the notes I made while reading) that give more context to those steps.
- Life as hunter-gathers was simple: eat, walk, sleep, fuck. The leader had a few simple responsibilities but got respect. In our extremely complex world, leaders cannot hope to understand or manage those systems, but our primitive mind keeps assuming they can.
- The survival or success of firms has little to do with their leaders, which should make you question their stupid-high salaries.
- The Soviets were spectacularly bad planners, but the USSR survived on the wits of its citizens, many of whom were punished for “deviations.” Palchinsky (*mentioned above) was murdered by Stalin’s goons for making too much noise about all that was going wrong.
- “If formal experiments hold few joys for traditional leaders, informal feedback will often fail to reach them, too… There is a limit to how much honest feedback most leaders really want to hear; and because we know this, most of us sugar-coat our opinions whenever we speak to a powerful person. In a deep hierarchy, that process is repeated many times, until the truth is utterly concealed inside a thick layer of sweet-talk” (p 30)
- High modernism and grand visions are dangerous because they over-reach.
- Whistle-blowers and short sellers are hated for interfering with the vision, but they should be rewarded for pointing out dangers (and actual fraud).
- “No plan survives contact with the enemy,” or, in Mike Tyson’s words, “everyone has a plan until they get punched in the face.”
- Hayek said a lot of this in his amazing 1945 paper (one of my favorites)
- The US only recovered from early failures in Iraq (recall the book came out in 2011) due to local leaders giving local soldiers authority to ignore orders from the top (“frag the lieutenant”) and solve local issues.
- Variation in ideas (and actions) is safer (see #2) than pursuing one big idea (cf., market indexing vs superstars).
- Many good ideas (and many more failures) come from “skunk works” filled with engineers and others freed from corporate oversight (#1, #2).
- Don’t be fooled by the “success” presented to you. Look at all the data (#3).
- A simple (sophisticated) economy usually makes simple (sophisticated) products due to many factors. Simple economies are usually poorer than sophisticated ones, but that’s not always true. Saudi Arabia is rich, but simple (selling oil), which is why its people have trouble making sophisticated products. Israel’s current wealth could be predicted by the (educational and cultural) sophistication of its people.
- The northern European port city of Lübeck (now in Germany) exported it successful model and founded the Hanseatic League (which dominated European commerce for centuries) because its ruler, Henry the Lion, established a stable and open trading policy in 1158.
- John Tyndall’s 1859 description of the Greenhouse effect was based on some pretty clever science (he showed that sunlight would heat water vapor in a flask but not if the flask was a vacuum)
- Most of our understanding of cause and effect, as applied to climate chaos (e.g., recycle! drive an electric car!) is off or wrong, so we should be worried about “targeted policies” (looking at you, politicians) and favor a direct instrument like a carbon tax: “What the carbon tax would do, then, is recreate the fantasy carbon calculator app, and give it teeth. No central database would be needed. Every product in the world would change in price according to the carbon content of the energy that produced it, and that would give every decision maker, fromthe electricity company to Geoff himself, an incentive toreduce their carbon footprint using whatever tactics occurredto them” (page 168).
- A complex, tightly coupled (think falling dominos) system is vulnerable to blowing up. That’s what happened in the Global Financial Crisis, when everyone realized that the bankers had no fucking idea what they were buying and selling. The current crypto-market blow up is a smaller, far less regulated, version of this (see #2) that would NOT have been avoided with regulation. (Lack of regulation is a feature, not a bug, when you’re inventing a market.)
- Separating banks into “utility” and “speculative” was a good idea in 2011, and it’s still a good idea, but bankers have bribed politicians to keep the casino open — and they’re gambling with your money.
- Financial regulators and auditors don’t spot corporate fraud: Journalists, whistle-blowers and other (non-financial) regulators. Why? None of these later types are paid by the firms they “oversee.”
- Individuals die as the population adapts, via selective breeding. That’s bad news for the individual but good for the species.
- Peer monitoring is far more effective than the boss looking over your shoulder.
- Disruptive innovations only get going because incumbents don’t see the potential in better ideas. They are comparing a new, rough idea to their old, refined one. “Big mistake” — Elon Musk.
- “The first principle is that you must not fool yourself — and you are the easiest person to fool.” — Richard Feynman. It’s for this reason that I named my website kysq (kill your status quo), since (#3) the first step to learning is admitting (not denying) that you’ve made a mistake. This is why good writers can “kill their babies” (paragraphs); they need to make peace with their losses.
- “I am not a failure. I have made a mistake.” (p 257)
- Self-employed people tend to be happier than employed because their customers give immediate feedback, good and bad, whereas employees need to rely on bosses who may not pay attention or know what’s good or bad.
My one-handed conclusion is that we can all benefit from Palchinsky’s Principles — and reading this book, especially as we enter an era that (in my evolving opinion) will not look like the 1930s or 1970s, but the 2020s, and it’s going to full of chaos and the need to adapt. FIVE STARS.