Individual vs. generalized fit

June 17, 2018

Everybody hates the US News & World report rankings of colleges. Does anyone even read that magazine anymore? And yet, many Americans who don't work in higer education still consider it the authoritative "ranking" of colleges.

I used to think college rankings were silly intellectual fraud. That is the scientists's view: are we being honest with ourselves? Does the data support the model? Not really. But I learned two things thinking about it.

The first: the need for psychological safety is real. Americans don't routinely put down a quarter-million dollars on intangible goods like education; when they do, they want to know they're making a good decision. So US News is really selling the same thing as a financial advisor: certainty. "If you do this, even though it seems crazy and risky, you'll get a good outcome". A lot of professional services sell this, too: spend a ton of money, but it's OK, because we've done this sort of thing before, we're good at it, and you won't lose everything.

The other thing: I think we're going to have an intellectual shift in how we think about "fit" over the coming decades: less "the best", more "the best for you". It's already starting in precision medicine, where new drugs are targeting thin slices of the population, acknowledging that something as complex as drug delivery might need to consider the characteristics of an individual, rather than assuming every human is identical.

Maybe US News & World report will eventually develop an interactive tool that lets each person build their own ranking. But I wouldn't be so sure, because humans also love to compare, and university education has a big status component to it, too.

It's not greed that drives the world, but envy - Charlie Munger


The best, maybe not the biggest

June 16, 2018

Caroline and I visited Paris last year after we got married. We stayed in the city for two weeks, which was a different kind of trip than the hopping around I'd done on previous trips, where you go a bunch of places and stay in each only a few days. Staying in one place lets you see things you wouldn't otherwise notice.

Visiting Paris as an American is kind of funny. On one hand, they have a ton of national pride: there's world-famous art everywhere, literary cafés visited by Balzac and Voltaire on practically every corner, and entire museums dedicated to scientific advancements in mechanical and optical engineering. The French have a long and storied history and they're justifiably proud of it.

On the other hand, you can't help but chortle a bit at how this tiny little country thinks they're the hottest thing, with only 1/5th the US's population. They have Voltaire; we have Einstein and Google. They'd probably be a German colony if we hadn't saved their asses in World War II.

And yet, what does China think about the tiny little US? 1/4th its population. Maybe my attitude was a little short-sighted.

The United States takes a lot of pride in being the biggest. Even though we aren't. This sounds like some sort of national identity crisis in the making.

The French figured out how to be proud of themselves without needing to be the biggest. I think the United States could learn a lot from them.


Why I'm not a digital nomad

June 15, 2018

I have a couple of friends who travel full-time. These "digital nomads", as they're called, have built lifestyles where they travel full-time, working remotely from their laptops.

I understand wanting to leave the United States.

For one, there's a lot beyond our borders. Monuments, other places and cultures, other cuisines. Travel is a great teacher.

Whereas back home, it's nothing but high taxes and a bozo president who wants to put up walls and shut it all down. Unfunded pensions, 30-40% marginal tax rates, and $800/month property tax bills for decrepit schools and potholed roads.

I get it. So why stick it out?

Life today is good. You can hail car service from your phone, book hotels by the hour, get food delivered at 2AM. You can watch any movie any time of day without leaving your house, and talk to anyone in the world for almost nothing.

There's a darker side to this convenience, and that is that you become conditioned to see everything as some sort of convenient, on-demand consumption purchase to be had on your terms, whenever you want, only to be thrown away or put down when you've had enough. Just swipe left.

That's a fine way to treat soda straws and minibar bottles. It doesn't work so well with marriages, communities, or cities. These things have to be built and that takes time.

It's great to consume other cultures in small doses. But like many of life's pleasures, the real satisfaction isn't from nonstop consumption, it's from building something enduring with a community. For some that's a sports team, others a family, still others, a business. Peoples' ambitions are different. But the desire is universal.

Other cultures aren't my consumption item. That's why I'm not a digital nomad.


When does crime become art?

June 14, 2018

Living somewhere means stewardship. Whether a city, a condo complex, or a neighborhood park, you want to see people treat it well, maybe even improve it. All the better if you do it yourself.

So it's pretty upsetting when I see kids dropping Burger King bags, or grown adults going 40mph down residential streets, in Oakland. I see both practically every day. Oakland sees itself as some real-world Wakanda —"Oakanda"—people from Wakanda wouldn't trash their city. We shouldn't either.

Try riding the BART. Personal experience: I had a knife pulled on me in 2014. In 2017, someone tried to rip my laptop out of my hands and bolt (I held on). I can't remember the last time I rode from Oakland to San Francisco without getting a "dance show", where someone brings amplified sound equipment onto the train and blasts the entire car with music.

I hate BART dance shows. They're obnoxious and people can get hurt.

But it got me thinking. Art, as a whole, is a pretty rebellious enterprise. A surprising amount of art was highly controversial when presented. I don't think BART should tolerate dance shows. But it bothers me more than a little that I might be killing someone's ambition to be a performer.


Beyond subsistence

February 05, 2017

In pre-modern times, the world didn't change. A man born 500 years ago could expect to live in the same town, working the same job with the same tools, his entire life. His world was static.

200 years ago, economic change started. It became possible for one person to produce and do more with each passing year. As people became richer, life expectancies increased. Change became noticeable over one's lifetime.

Today, almost nobody is a farmer. In Silicon Valley, changing jobs every 3-4 years is commonplace. It used to take decades for a company to reach billions/year in sales; now it takes five. [1] Today, I have video chats with friends around the world almost free of charge. Were a pre-modern man transported to today, he would surely think we've invented magic.

So, what about the world of work? We've moved beyond subsistence farming; what's next? The economy—our jobs, the companies we buy from, the technology we use—is changing faster than ever, but our beliefs about work haven't kept up. Take "seniority": what good is it when the company won't be around in 10 years? When someone takes a risk, working at a smaller company, or trying something new, and it doesn't work out, are they "damaged goods" for life?

We're going to need answers to these questions soon. If change brings chaos, and the rate of change is still accelerating, the only reasonable conclusion is that the world of work will get more turbulent. As Robert Reich [2] reminds us, consumers will get a better deal than ever, but careers, and the yardsticks by which we measure them, will shift.

It didn't used to be this way

Last year, reading Piketty's Capital, I came across the following chart:

Year World output World population Per capita output
0 - 1700 0.1% 0.1% 0.0%
1700 - 1820 0.5% 0.4% 0.1%
1820 - 1913 1.5% 0.6% 0.9%
1913 - 2012 3.0% 1.4% 1.6%

The chart shows per-year change.

Seeing this for the first time, I couldn't believe my eyes: for 90% of the first two millenia of our age, the economic output of a typical person didn't change? Over his entire life? The guy would start at $10k/year and earn this forever?

Indeed, my interpretation was correct: a man born in this time would take the same job as his parents (likely farming), which was what his family had done for generations. He would never change jobs, get a raise, move to a different city, or get better medical care.

In short, life was static. And it had been that way as far as anyone could remember.

What changed

So, what changed? How did we go from $10k/year for life, to a new iPhone every two years?

The question is one of the most interesting in economics; the rough answer is that "we started reinvesting our profits" [3]. As farmers, rather than eating every last kernel of grain we harvested, we set some aside to finance "experiments", things we tried, but weren't sure they would work. People call these experiments "investments" in polite company, "speculations" when they have a lot of risk, and "gambles" to make them sound nasty, but the distinction is artificial; it's all the same stuff: risk, uncertainty, and reward, just in degrees.

For a farmer, one such experiment might be planting the crops a bit deeper in the ground, or putting more water on them. Like any type of gamble, it's only prudent to do when a loss won't be catastrophic.

Combine enough of these little experiments, and get people discussing them, and what emerges is science—the accumulation of knowledge via empirical methods, reproducible results, and peer review.

Governments do it, too. If a little more tax is collected, governments can use tax revenue to finance speculative ventures. The most famous example: Columbus's voyage to the New World, financed by the Spanish government. NASA is another government-funded, speculative voyage of exploration.

As the world becomes richer–and it is, despite concerns over inequality–it is inevitable that an increasing proportion of economic activity will be less hand-to-mouth, and more speculative in character. The quantity of shirts, lunches, and housing humanity can consume has a physical limit. And we're heading toward an age where almost all mechanical labor can be done more accurately, and cheaply, by machines.

Work

If it's inevitable that more economic activity will become speculative as the world gets richer, what does this mean for the world of work? What's going to change for, say, a 21-year old college grauate entering the workforce?

I have four ideas I'd like to put forth.

One thing's certain: the arc of careers will change. A traditional business career consists of handling small tasks, and with the exercise of good judgment, handling progressively larger and more important ones. But speculative ventures aren't matters of discipline, like getting to work on time, or judgment, such as knowing not to lie on one's expense report. Success involves a lot of traditional stuff like skill and hard work, but with a lot more randomness mixed in.

This is a big problem in Silicon Valley today: it's socially acceptable to put successful entrepreneurs in positions of trust, but not "unsuccessful" ones. This is a classic case of "judging decisions by outcomes, rather than process" that writers like Nassim Taleb rail against. The problem is a common error of measurement: basing decisions on what's easily observed (outcome) vs. something harder, but more predictive (process). For all the lip service paid to "innovation", "failing fast", and the like, most of Silicon Valley's upper echelons (executives, venture capitalists) haven't "failed fast", despite otherwise outstanding work ethic, razor-sharp judgment, or whatever else might make a difference. Hiring is as conservative as ever, because most people still care about their reputations rather than outcomes. It's better where people are working for themselves, rather than trying to look good for a boss; they have more skin in the game. [4]

Second: more of work will look "silly", "trite", or "playful". The press loves to take cheap shots at Silicon Valley, deriding it as a place full of "facebook for cats" and other genuinely stupid ideas. The problem is, it's just too hard to tell what's going to work and what won't before you try it. I was recruited heavily by Uber a few years ago; looking back, that was a rocket ship I missed. I don't regret it; I had no idea they'd become as big as they did. Thomas Edison took a lot of flak for working on a newfangled toy of the rich called "electricity"; maybe someone should've told that slacker to get a job, already.

Third: inequality will increase a lot. For wage-earners, when the option is between two jobs, and one pays 10% more than the other, that's a relatively bounded set of outcomes. For investors, it's even worse: it's not the difference of one percentage point of return, like in real estate, it's total loss versus 100x gain. There are neighborhoods now, in Silicon Valley, where next-door neighbors can have 10x or even 100x income differences. "Keeping up with the Jonses" takes on a whole new meaning when one family is struggling to make mortgage payments, while another is buying a private island. Wealth and income differences like this are a fact of life in Silicon Valley, and it's not getting better.

Fourth, the pressure to make the right decisions, join the right company, and see into the future will increase. When comparing two jobs with 10% pay difference, the set of outcomes is relatively bounded. Not so when the choice is, "join the right company/work on the right idea, work is now optional for the rest of your life; wrong company, you're unemployed and broke". This dynamic is already a significant source of stress for anyone working in a high-uncertainty industry (finance, Hollywood) and it's not going away.

Wrapping up

We're living in amazing times. We're going to see more change in our lifetime than perhaps, the last 3-4 generations in aggregate. Autonomous vehicles are almost reality. We can watch almost any movie, read almost any book, or write to anyone on the planet, instantly. I wouldn't be surprised if fusion energy becomes reality in my lifetime.

Human attitudes and institutions are always slower to adjust, though. In time we'll adjust; just be sure not to be critical of someone working on something that seems "stupid". Who knows, they might be the next Marie Curie, or Thomas Edison.

Notes

[1] The Economist: From 0 to seventy (billion). I take no position on Uber's valuation, social impact, fairness to drivers, etc.; I am arguing only that its revenue growth is extremely rapid.

[2] Reich's Supercapitalism has some depth on this point: that as competition heats up, it's going to be better than ever to be a buyer, but tougher than ever to compete as a producer.

[3] This explains what, not why or how; check out Yuval Harari's Sapiens for a good outline of the why and how.

[4] As in so many other areas, Y Combinator is leading the way in this regard, making Adora Cheung a partner despite Homejoy's failure. I'm not surprised, since the partners invest a lot of their own money and don't care too much about impressing people.