What The Internet Means

This is the best slideshow I've ever seen. It is about the internet, and what it means. I couldn't possibly sum it up. Just start going through it and you'll probably be hooked.

It's amazing to think how lucky we are to live in such an exciting time.

Digital Strangelove (or How I Learned To Stop Worrying And Love The Internet)

View more documents from David Gillespie.

The Identity Theory of Economic Choice

The assumption that individuals are rational utility maximizers is one of the cornerstones of virtually all modern economic thought. This is commonly referred to as "rational choice theory".

This does not mean that individuals are infinitely and inherently selfish. Gary Becker, Nobel-winning Chicago school economist, argues that "...individuals maximize welfare as they perceive it, whether they be selfish, altruistic, loyal, spiteful, or masochistic."

This argument reveals rational choice theory with greater nuance than most economists, but I think it misses the most crucial point. It answers the question "how do individuals maximize their welfare?" but ignores the larger question "what entity's welfare do individuals maximize?"

Discerning what entity's welfare the individual maximizes concerns the ends of economic activity (what people work for), whereas the traditional theory focuses on the means (how people work for something). The individual as articulated by the traditional theory would say, "I work for my welfare by ______", but in reality, individuals say "I work for _____'s welfare by _____".

Insofar as I identify with an entity, I work for it's welfare. For example, insofar as I identify with my nation, I work for it's welfare. Insofar as I identify with my family, I work for it's welfare.

We all identify with multiple groups, to a greater or lesser extent, and at the most basic level, we identify with our selves. When our multiple identities conflict with one another, this is a true conflict of interest. Conflicts between duty and personal interest are commonly called conflicts of interest, but a rational utility maximizer would not have an emotional dilemma dealing with it. They would simply calculate the costs and benefits. When true conflicts of interest occur, we face a deeper question: who/what do we identify with?

Economics, and all rational choice theories that I know of, assumes that individuals use groups as a tool to maximize their individual welfare. The traditional theory would argue that when we help others, we don't actually identify with others, we satisfy our preference for altruism by giving to others. However, I think in reality we belong to groups for more primal, less calculated reasons, which I will discuss later in this essay.

Some might argue that my concept of identity is too imprecise, and not suited to the positive science of economics. This may be partially true, but my explanation clarifies another eternal mystery of economics - what determines individual preferences?

The theory of evolution has strongly established that the overriding interest of any entity is to ensure its survival. I believe this is to be true of all entities, whether they are groups of people or single celled organisms. Whatever we identify with, we work to ensure its survival.

In a modern economies, where we find it unnecessary to worry about our personal survival most of the time, we still constantly exercise our reflexive drive to survive by channeling it into other identities - groups. This makes self-sacrifice possible.

The only phenomena I can think of that this theory can't explain are suicide, masochism, and other forms of self-destruction. Economics cannot explain these either, they are not rational activities.

As to the question of how we form our identities, that is better left to psychology to discuss.

Here are a few examples that help me illustrate my point:

When you vote, you know that there is a very slim chance your vote will affect the election, and the cost of your time and effort required to actually vote outweighs the potential benefit of your vote being pivotal, but you still do it anyway. Why? Because you identify with the your country and you wish to see it steered in a positive direction.

When you help a family member in need, you aren't doing it for personal benefit, you do it because you identify with that person as a member of your family, and you care for the common good.

What Granholm Did Wrong

If you're not doing the right thing, then fighting harder just makes things worse. You end up digging yourself into a deeper hole.

The Washington Post recently did a piece on Granholm's fight against unemployment in Michigan. It's a serious problem that deserves a valiant effort, but I sure wish she would have spent her energy more wisely.

Consider some of her brilliant tactical moves:

"In her effort to attract employers, the governor has taken up the latest arms in the economic arsenal -- tax credits, loans, Super Bowl tickets and a willingness to travel as far as Japan for a weekend to try to persuade an auto parts company to bring more jobs to Michigan.

...

"She had spent months calling, e-mailing and meeting with city and state officials trying to sway the company to take a package worth about $70 million in tax breaks to stay in Michigan.

...

"A $37 million tax package helped persuade Michigan-based United Solar Ovonic -- she wooed the chairman with a trip to the 2006 Super Bowl in Detroit -- to build a solar panel production plant

Instead of literally begging people to bring jobs to Michigan, offering to subsidize anything that moves, and creating more tax loopholes for certain industries than swiss cheese, why didn't she focus on creating the right environment for organic economic growth?

No matter how many degrees she has from Harvard, Granholm is still not as good as the market at choosing what jobs should come to Michigan. She can try to lure a company to open up a factory in Michigan with Super Bowl tickets, but that is not a responsible long term strategy for growth.

Here's the outcome of one of her brilliant job-creating acts of desperation:

"With a tax incentive package worth more than $100 million, Michigan beat out Arkansas, Missouri and Oklahoma, as well as Spain, in getting Hardee's company and two other alternative-energy firms...

"...In the spring of 2008, Granholm returned to Greenville to tour the United Solar plant that replaced the Electrolux factory.

"They had product orders all the way out until June 2009 back then," said Greenville Mayor Ken Snow. "But the global economy shifted. That left them with more product than orders that need to be filled."

The pesky thing about markets is that they have a tendency to shift. It's a natural and positive process for society. But when you offer $100,000,000.00 in taxpayer money to specific companies to locate in Michigan, you have to either revert to protectionism, reneg on your deal, or lose a $100 million dollar bet that you made with our tax dollars. None of these are good options.

Granholm's erratic behavior has done serious damage to Michigan's economy.

Before, we had the reputation of a state that constantly tried to protect its major industry. We shielded automakers from foreign competition, so they could shut their eyes and pretend the world wasn't changing. But it couldn't' last for long, because all walls eventually fall, and reality came crashing down on Michigan's auto sector and it's overpaid workers. If we had resisted the protectionist temptation from the beginning, maybe the big three would have adapted, GM wouldn't have gone bankrupt, and there would be a lot more jobs in this state. This is why it is crucial for government to be pro-market, not pro-business.

Now, we've succeeded in losing the protectionist reputation, but we have a worse one: erratic. Businesses do not have confidence in the government of Michigan. While Granholm has been traveling the world offering subsidies to anyone who's thinking about bringing a large-scale operation to our state, she's failed to notice that government intervention in the market always creates winners and losers. With every subsidy you offer, you are picking one winner and declaring everyone else a loser. You don't have to be a mathematician to understand that this is a losing equation. This is why it is crucial for government to be pro-market, not pro-business.

However, there is one thing that Granholm got absolutely right. She admits to herself that she doesn't know what she's doing:

"Granholm remembered coming home and telling her husband, "I just don't know what to do for people."

Don't get me wrong - I admire the persistence and effort on her part, I just wish it was more skillfully applied.

I wish she would have fought for tax reform, making the system fairer and simpler, so big corporations can't hire legal departments to find loopholes to exploit while innovative small businesses get stuck paying the lion's share.

I wish she would have fought for efficiency and accountability in government, so we could reduce the tax burden on our struggling businesses, so they can create more jobs and prosperity.

I wish she would have fought for maintaining healthy markets where innovators and entrepreneurs can thrive, and growth can happen organically.

Those are the things Michigan needed most from her.

Incidentally, these are the things Michigan can expect from Rick Snyder. This wasn't going to be a post about his campaign, but I feel obliged to say that if you agree with my analysis of Granholm's failures, you should seriously look into Rick Snyder.

On Writing Well

Have you experienced the calm that follows reading great writers? It works better than most headache medicines. It soothes the soul to allow beautiful passages to seep in.

I've been reading On Writing Well by William Zinsser, and quickly discovered that the book is amazing. Never before have I paid so much attention to words and phrases. Even skimming will make you a better writer.

Take, for instance, his advice on style:

"First, then, learn to hammer the nails, and if what you build is sturdy and serviceable, take satisfaction in its plain strength."

There is great wisdom in the carpentry metaphor. Writing is a utilitarian act - it must be functional above all else. The most beautiful chair in the world is no good if you can't sit on it. Strip down to the essential. Those who excessively employ "big words" usually do so out of anxiety, not confidence. Only after you build the framework can you add ornament. Style takes a lifetime to develop.

I'll close with two of my favorite quotes (so far) of the book:

"Telling a writer to relax is like telling a man to relax while being examined for a hernia"

"You are writing for yourself. Don't try to visualize the great mass audience. There is no such audience - every reader is a different person."

Why Must My Interests Define Me?

Image via Wikipedia

I suppose it's the nature of my brain. When some new curiosity pops up, I exert much effort towards thinking it through, finding out more about it. I dive in head-first, and I don't like to be bothered to come back up for air. When, inevitably, something else pops up, my interest drags me away. I'm the guy who's dog is really walking him, instead of the other way around. As the metaphor implies, it feels like I don't really have control.

What's really strange is that, today, it is expected that we form our identity around our interests. I, for one, have a hard time doing this. I change my interests too much.

It bugs me beyond belief when someone I haven't talked to in awhile asks me how x is going, even though x hasn't crossed my mind in two years. How strange that someone's entire mental image of me centers around something that was only a passing curiosity. I can't help but feel that they have no idea who I am.

We're confronted with the challenge of defining ourselves in terms of our curiosities at all turns in life. People ask us: "what do you do?" (or if you're in college: "what's your major?") before they ask anything else. They check out our books, magazines, blogs, facebook "info" pages, groups we're involved with, etc. They attach eternal significance to chance topics of conversation we initiate. They judge us accordingly. Their opinion of our interests becomes their opinion of us.

In truth, I suspect that we are in far less control of our interests than we may believe. I might even say that there are no true interests - only curiosities that have overstayed their natural course, due to convenience or other personal attachments.

In my own life I have noticed that I can be interested in anything, if I find the correct point of entry. Most of the time, we only see the external appearance of a subject, and it doesn't make sense to us, so we dismiss it. There are things that I am not gripped by (chemistry, for instance), but that doesn't mean that I couldn't be gripped by it. All I need is the time and a proper introduction. I think that's all anyone needs.

To be clear, a proper introduction does not mean "Chemistry 101". A proper introduction is more like having a real sense of the unknown, the itch that the subject tries to scratch. Some people are so infectious with their itch, that they give their itch to us. These are what we call good communicators.

People who get you itchy are, and always will be, rare.

The prevailing wisdom of today is that the internet will enable a cornucopia of long-tail tribes to flourish. I doubt the niches will be as charismatic as some would describe. Maybe your business benefits from the capitalist principle of specialization, and you are a peddler of highly-specific-use wares. Maybe there are about 50 others like you, now able to connect for the first time due to the internet.

I don't think a tribe will form around it. Capitalism's long tail of trade vastly outstretches the human talent to get others itchy.