Superegos for the digital world
For each topic you want to present, you might want to follow the sequence below. In a typical PowerPoint presentation, this should be done for each single page.
Context … Tell the audience why you are going to discuss the topic, how it is relevant to them.
Content … Give your key message…
Colour … Close with vivid examples illustrating the point(s) your are making …
The author’s theory is that the US have reaped the low hanging fruits of productivity, and that its future material and financial growth is at risk. He details three key areas that fueled past productivity, but will not drive progress going forward :
– access to free land, from the 17th century to the end of the 19th century
– improvements in education. The percentage of the population graduating from High School grew from 6% in 1900 to 60% in 1960, and 74% today. Only 0.25% of people went to college in 1900, a number which has grown to 40% today. But we seem to have reached the limit of these improvements, as college drop-out rates have grown from 20% in the 60s to 30% now …
– a host of technological breakthroughs from 1880 to 1940. These have slowed down since then, and as the author puts there is not much difference between a kitchen or a house) today and one in the 50s in terms of the basic functionalities that had then become available (fridge, TV …). 80% of the economic growth from 1950 to 1993 actually came from innovations that happened before that time.
The author links that last point with the drastic reduction in the rate of growth of the median income, starting in 1970. His view is that discoveries since then have been geared towards private goods rather than goods for the larger public. The impact of the Internet is much more complex though and there is a whole chapter on that, which I will comment on later.
There is a whole section then looking at how we have tended to overestimate productivity through the GDP calculations :
– government spending is always factored in the GDP at cost, regardless of the utility or value created. This does not take into account the fact that as government grows there will be a diminishing return on that value. Since the 19th century the cost of government (excluding redistributions) has grown from 5% of GDP to 15-20%, which means we have overestimated the GDP growth, and the productivity, derived from that growth in spending.
– there is a similar issue with Healthcare, which is 15% of GDP in the US. Its efficacy is impossible to determine, and there is an established disconnect across modern countries between the spend, and metrics such as average life span.
– same thing with Education, which represents 6% of US GDP. Reading and mathematics scores at the age of 17 have not changed since the early 70s, while the expenditure corrected for inflation has doubled per pupil.
The looming question that the author then tackles is of the impact of the Internet. To summarise, he says that the Web provides huge innovation for the mind, not for the economy. It makes us happier and enables personal growth, but does not impact the economy very much, as so much of the content is free or very low cost.
So the Internet is also not properly reflected in GDP and productivity metrics, and that is one area where GDP underestimates the positive impact of technological change.
The issue though with the Internet revolution are the following :
– we have been counting on real productivity and material economic impact to generate future revenues and pay off our debts …
– the benefits from that revolution are unequally shared. Using the Internet positively is a function of one’s cognitive powers, while past inventions were usable equally by everyone.
– it creates few jobs. Google 20 000 employees, Facebook 1700…
The author then goes into an analysis of the current Economic crisis, which he sees as a result of overconfidence across our society in productivity. I am not convinced that should be the only explanation, but this is at least a refreshing view and a new angle.
Looking forward, despite the gloomy title of his book, Mr Cowen sees some positive future trends :
– india and china growth will create larger markets that will reward innovations again. They have so far grown by imitating the west, they will probably fuel innovation in the future.
– Internet might start generating growth. It creates a “cognitive surplus” (Clay Shirky) as billions of people are getting smarter and better connected, which would have positive effects on innovation.
– the Obama administration has taken steps to reform education
He conclude with an appeal to raising the status of scientists in our society, to make science and technology aspirational and rewarding careers for our children … Could not agree more !
So before I give up reading it again, let me share the content of the piece I have managed to read through !
Steven Pinker (Wikipedia entry) analyses language as a window into the way we think. He starts by asking the profound question of ‘How do children learn language ?’, and especially focusing on how they know what NOT to say.
For example, one can say :
“I sprayed water onto the roses”
As well as
“I sprayed the roses with water”
We can imagine that hearing such multiple examples allows children to determine that there is a pattern, a rule. It could go like this : ‘if I can say “something actioned object a onto object b”, then I can equally say “something actioned object b with object a” ‘.
But that rule does not always work. For example :
While one can say
“I coiled a rope around the pole”
One cannot say
“I coiled the pole with a rope”
This is a very important issue, more than it first appears. We could try to explain that this is just an exception. But this itself poses another problem. How would children learn these exceptions ? They can determine patterns by listening to adults, but exceptions like the one above would require them to know what is NOT being said. The only way this could happen is for the child to make the mistakes, and get corrected. But this would require massive additional amounts of interactions which don’t seem realistic.
Fortunately there is another explanation offered by Steven Pinker.
We were looking for rules that would involve simple grammatical patterns. Instead it appears that the rule is about a mental picture of the action being performed. This is where the window into our underlying thought processes starts opening.
Our brain seems to classify verbs in categories that correspond to types of actions performed, but with distinctions far from obvious at first glance. For example, brush, plaster, rub, drip, dump, pour, spill all seem to pertain to getting some liquid or goo onto a receptacle. But the fact that you can “smear a wall with paint” while you cannot “pour a glass with water” tells you that you have to classify them in two different types of actions :
– the first type is when you apply force to both the substance and the surface simultaneously : brush, daub, plaster, rub, smear, smudge, spread, swab. You are directly causing the action, with a sense of immediateness.
– the second type is when you allow gravity to do the action : drip, funnel, pour, siphon, spill. You are acting indirectly here, and letting an intermediate enabling force do the work. There is also a sense of the action happening after you have triggered it, instead of immediately.
The fist type allows the “smear a wall with paint” construction, the second type does not.
Going further, the book explains how researchers have used non-existent verbs such as “goop”, telling children that it means wiping a cloth with a sponge, to test how they instinctively use these verbs, to test that the above rules apply … And they do !
So there IS a logical set of rules that explain how we talk, and these rules provide a glimpse into the mental models we use to conceive of reality, even before we verbalise our thoughts.
I hope I gave you a small taste of that fascinating piece of writing, and even more that you will become as curious as I am of this field of study. Another great book by the same author “How the Mind Works” attempts to explain the basic mechanisms we use to think, it is maybe an easier read, but is equally mind-provoking and fascinating.
What will it be for you ? Read one of these books and let me know !
We saw this morning a good thought-provoking video about the importance of oil prices to our economy, and the ineluctability of drastic changes as the price of a barrel goes over 100 dollars for good.
The orator is Jeff Rubin, former chief economist at ICBC. His wikipedia bio is here.
The first part explaining why the rising oil prices have triggered the recession is not the best, but keep listening to the part where he first predicts a sustained (and rapid) increase in oil price to triple digits, and then explains the impact on our economic model.
The issue of peak oil has been shadowed in the past two years by the recession, and by global warming. It is a healthy reminder that for a while we are dependant on oil as a source of energy, and if indeed the demand-supply equation drives prices up, we have fundamental adjustments to make to our societies.
A couple examples of these adjustments mentionned in the video :
– the US government should have invested money into public transportation instead of bailing out GM.
– industries will have to be localized again, as transportation costs will no longer be incidentals.
Here is the link – enjoy !
Video of Jeff Rubin on the triple digit oil prices and the impact on economy
About a month back when the wikileaks disclosures began, we had a discussion with Aouda on wikileaks : was it right to divulge state secrets, including some that could give information to terrorists ?
As a business professional, my first reaction was to disagree. Even with the highest desire for openness and inclusiveness, we all know that we cannot always tell the naked truth. It could be misinterpreted, or used against the interests of the business. Or it could be that some things are just speculations, “what-if” scenarios that won’t end up being implemented, so why create anxiety or disruptions by communicating them ?
Aouda was reacting instead out of principles, and thought that the transparency brought about by wikileaks was a fantastic innovation.
Why did I personally change my mind on the matter and become an advocate of wikileaks ? I guess it boils down to some moral aspirations, coupled with some dose of cynicism and realism.
From a young age I’ve always dreamt of a world where the weak would be protected from the brute. This meant there had to be a way to immediately alert everyone to injustices being committed. That’s where the internet changes everything. Where it took a Zola to defend a Dreyfus, anyone today with a blog can draw the attention to events happening on the other side of the earth. See what just happened in Tunisia, where one of the most repressive police states could not hide the death of demonstrators.
So internet, and wikileaks, is probably the kind of “alert system” I was hoping for !
Beyond childhood dreams and naive aspirations, transparency could well be to public policies what democracy is to political systems. Churchill famously said that “Many forms of Government have been tried and will be tried in this world of sin and woe. No one pretends that democracy is perfect or all-wise. Indeed, it has been said that democracy is the worst form of government except all those other forms that have been tried from time to time.”.
Similarly, transparency will create privacy issues, will stir unwarranted troubles, but will on balance better than anything else drive fair play, honesty and justice.
Just my 2 cents here, so if you want to dig further, i found on this great french blog by Francis Pisani (http://pisani.blog.lemonde.fr/ Click here to follow) the following links to articles in english. Enjoy !
“Government should be transparent by default , secret by necessity.”
And the final word goes to Joseph Pulitzer himself : “There is not a crime, there is not a dodge, there is not a trick, there is not a swindle, there is not a vice which does not live by secrecy.”
We went to watch “Inside Job”, a fabulous movie about the crisis, mixing interviews of the highest profile international experts and leaders, with an outstanding narration by Matt Damon !
It pretty much explains what is already laid out in several books, but hearing the confused explanations of top players, their shameless lies, just give the crisis an additional dimension of amorality. It leads one to question what kind of system brings such shallow characters to positions of power or influence – not only in business, but also in politics and academics. The interviews of Eliot Spitzer, former New-york Attorney General, are very revealing, and it’s a shame no prosecutor of that caliber is going after those who should be held accountable for having created the system and profited from what ended-up in ruin for others.
An absolute must-see, you can get all details on IMDB at http://www.imdb.com/title/tt1645089/
A theme is emerging in lots of recent readings – the impact of demographics on society and economy. We’ve probably ridden a wave of demographic explosion in the West over the past 50 years with the Baby Boom. And it’s interesting to look at the excesses of the bubble years, and the current bust, as the result of the savings of retiring Baby Boomers looking for high yields.
An example I recently read explained the interest rates as the demand-supply balance between the older and younger generations. The older people have savings, and in order to secure their retirement want to lend it to secure regular yield, as high as possible, ie high interest rates. The younger generation has no savings, but wants to borrow money to buy a home, start a business, and are looking for low interest rates. The proportion of both population hence drives the interest rate level – it is high if there is a large proportion of young people, low if there’s an excess of old people.
Aouda and I were born when the Baby Boomers entered the workforce, and when I read this all of a sudden the high interest rates my parents paid on their mortages started to make a lot of sense – as did the current low interest rates !
Of course, our world itself is highly bipolar in this regard – one of the biggest difference between the West and the high-growth countries is the demographic structure. Just look at an interactive map of the world as they now exist, and just browse various countries for the average age of their citizens, you will be amazed at the differences – US and Europe at 40 years (and sorry Mr Rumsfeld, there’s really no “Old Europe” and “New Europe” – it’s all pretty old all the way to Russia), versus India at 25 and Africa at 20 years of average age ! (Never forget Africa and its 1 Billion of people, even if they don’t make the news as they’ve not taken off economically yet). Very interestingly, China is already at an average age of 35 years, quite close to the US average age actually – not clear what the implications are, except it might mean China might be the Japan of yesteryears, which after explosive growth attracting everybody’s attention will rapidly stabilize and have to cope with its own issues.
This is such a fascinating topic, especially when you think beyond economics and look at the societal implications. A large young population giving us Woodstock, the Hippies and May ’68, what will these same folks drive in our culture and politics as they retire and become unsurprisingly conservative ?
Aouda is reading a book called “The 4th Turning” about supposed patterns in generations behaviors – interesting to see how that can shed some light into this issue !
I have recently finished a good book : “Whoops!” by John Lanchester. It is another of a long series of readings i have done over the past two years since the crisis hit. Like most of them it explains the root causes of the financial and economic crisis, and the lack of cure so far. It does so probably less accurately but in a more lively and entertaining manner.
One of the most interesting contentions of the author is that with the end of the cold war and the obvious failure of communism, capitalism found itself unchallenged as a paradigm. The most extreme supporters of free unbridled markets found themselves in a position of ideological monopoly, and were able to dismantle the apparatus of controls that had been put together by governments after the crisis of ’29 and the social safety nets built during the cold war at a time when communist countries were claiming to bring security and happiness to their citizens.
It is an interesting theory, but I am not entirely convinced by the logic of the arguments. It certainly fails to recognise the historical events that were the opening up of India and China and their return to the forefront of the international economic scene after two centuries of absence. It also does not mention the impact of an ageing western population, and especially of the baby-boom generation, creating a glut of retirement money chasing yields that a smaller number of younger people could not satisfy -unless that is one could find a way to hand out large numbers of real estate loans to folks who could never pay them back …
Still a very interesting read !
P.S. One particular paragraph in the book made me think hard … And not very successfully so far ! I searched the Internet a bit and found the following link which will show you how confusing some statistics can be.
Click here for link
Happy thinking !
Reading a great book “13 things that don’t make sense” by Michael Brooks. It throws great perspective into news you hear about dark matters and other current scientific pursuits. Bottom line we know much less than we pretend to, and there is experimental data that we have trouble fitting into our models. This reminds of scientists saying in the 19th century that everything had been discovered (and parallels in human sciences of “the end of History”). It is great and refreshing to see that we are but in the infancy of understanding the laws governing our world, and there is always going to be room for new Einsteins !
