Evolution, Free Markets and Tribal Behavior

Michael Shermer talks about some interesting stuff at Google. One interesting point he raises is one that should be a commonplace observation, but doesn't seem to be obvious to a lot of people. He makes the point that free markets and evolution are both similar phenomena, bottom-up non-directed self-organizing optimization that produces strikingly ingenious solutions that resemble 'designed' ones. Why then are "conservatives" (in American terms) predisposed to the Free Market, but less accepting of evolution, and "liberals" vice versa?

Why does the Euro exist?

If you've been wondering why Greece is in trouble, and why the Euro exists, here's the big picture that the papers don't often give you.

As Stratfor puts it, the Euro is intended to harness the power of Germany for good , by turning it into Europe's economic engine, while the rest of Europe turns into a captive economic market.

Europe has been a conglomeration of multiple regional economies, dependent on inland waterways. Where such waterways do not exist, you have agrarian economies with a less developed industrial base. As long as they were on different currencies, things were good and classical. The Euro changed everything:

Part of being within the same currency zone means being locked into the same market. One must compete with everyone else in that market for pretty much everything. This allows Slovaks to qualify for mortgage loans at the same interest rates the Dutch enjoy, but it also means that efficient Irish workers are actively competing with inefficient Spanish workers — or more to the issue of the day, that ultraefficient German workers are competing directly with ultrainefficient Greek workers.

In effect, capital-rich Germany lends to inefficient countries like Greece, allowing them to buy German goods. At the same time, the Euro keeps the Greek currency strong and prevents their inefficient production engines from being more competitive in the global market, turning them even more uncompetitive over time.

What do Greece and co get in return? Cheaper interest rates on Euro loans, enabling spendthrift governments to get on a permanent (or so they thought) easy-money borrow-and-spend ride powered by surplus cash from all over the world being invested in Euro debt. A debt-driven social democracy in the less productive parts of Europe was paid for by a Euro-debt-hungry world. Greece, Spain and co didn't mind being able to spend liberally without all that bother of having to create a sound economy to generate revenue. The perfect Faustian economic bargain, while it lasted.

Now the ride is over. Just like those AAA subprime loans, borrowers have figured out that Euro-denominated Greek (and Spanish, and Portugese) debt wasn't a safe place to put their money in after all. Well, duh!

Selling your soul to Mephistopheles usually doesn't end well.

To be read, as always, with the caveat that anyone who takes economic advice, or advice about economics, from someone who calls himself the Mad Hatter must have his head examined.

School vs. Education

Ken Robinson's legendary TED talk in 2006



... and the followup in 2010


Hard to argue with that, isn't it? I don't think I do disagree, just that I have a slightly different perspective on why it isn't altogether bad that schools are the way they are.

Because schools aren't all there is to education. School and college teach you skills. Education introduces you to knowledge, and prepares you for wisdom should you wish to embark on the path that leads to it.

School and college work on standardized curricula, common terminology, and common modes of thought - all directed at preparing you to be a member of an economic value creation endeavor of some sort.

Education is a much broader endeavor, drawing upon resources as diverse as family, friends, mentors, books, libraries, the internet, and many others. You can be schooled without gaining an education out of it. You can be educated without formal schooling and sometimes even in spite of it.

Why do we need schools to teach us skills? Every one of us is an economic actor, a producer and a consumer, driving the economic wheel that continually enriches the human race. Unless you're one of those mythical creatures that is "truly passionate" about writing C code, you cannot (and should not) necessarily earn a living doing what you like doing most. The intersection of what you can do, what society values and what you can tolerate is your set of choices.

Why do we need education? To drink from the ocean of human knowledge and thought that has preceded us, to understand life and the universe to whatever minute degree possible, to seek ones passions wherever one may find them. Education is about truth, and beauty, and how and where to seek them. Economic value is of little consequence for truth and beauty.

So, do not expect your school to educate you. Expect no more than marketable skills there.

Your education is too important to be left to anyone else other than you, and too important to be limited to what is marketable. Drive it yourself, and seek your passion there.

Freedom from ...

Steve Jobs is a cool guy. He has a sense for product design, he is known to be a marketing genius, and can make a rickety old company execute like a fresh young one. Is there anything he doesn't have?

Anything?

Just maybe, is he lacking in a sense of irony?

Repeat after me

War is peace, Freedom is slavery, Ignorance is strength

Perhaps one day I will stop making 1984 comparisons every single time I mention him or Apple.

Perhaps in time I will learn to love Steve Jobs.

Should Kasab Hang?

Indeed, should he?

Isn't it barbaric to take a life to punish him for his barbaric acts? Will it deter the next bunch of Muslim terrorists, who believe they will lead eternally blissful lives in heaven in the company of three score and twelve virgins for their evil acts?

Yes it is, and no it won't.

So then, why hang him?

This is a man who participated in the murder of hundreds. Do not underestimate the anger a lot of people feel at this. By not administering punishment quickly, we engender a sense of persecution, and a deep rooted anger at the "system" and the "other" (read Muslim) in large segments of the population.

We sow the seeds of future Gujarats and give birth to future Pragya Thakurs. We guarantee that Hindu terrorism on a larger scale than the pathetic Abhinav Bharat will rise on the back of public resentment at a government that lets terrorists live and citizens die.

We create a future where Hindu and Muslim terrorists compete to bomb, shoot and otherwise kill innocents. We convert ourselves into Lebanon, or worse, Pakistan.

Hang him quickly, I do not want to live in such a country.

Beware!

Do you hear a rythmic knocking sound from far away? That's the sound of terrorists knees banging together across the border. Out of sheer fright. Just who or what could reduce hardened terrorists into a state of sheer terror?

None less than A K Antony himself. His bold declaration to terrorists - if you fail in your certain-death suicide missions, we'll sentence you to death. So there. Wouldn't you be scared if you were a terrorist?

And if you heard some teeth chattering from further away, that's the Washington political establishment worried after Antony reiterated his "concern" at the US rewarding a certain failed-state-who-sponsors-terrorists with more aid, and even more weapons.

Aren't we lucky we have such great men at the helm?

Netflix's "Culture" Presentation and What It Says

Culture

View more presentations from Reed Hastings.

Netflix's "Culture" presentation has become a cult classic on the tech startup subculture on the internet, so it's probably worth the while to read (and blog about). This became a hit because of the way it went against received corporate wisdom on many things - sometimes saying exactly what geeks have been mumbling in corridors everywhere, sometimes bringing a new light to bear on problems.

What I found most interesting was the approach to valuing individuals and their abilities - by giving them freedom to do what they know best. A lot of places claim to hire "only the best" but then shoot themselves in the foot by not trusting the judgment of the alleged rock stars they hired.

Where Netflix goes against established corporate practice is in rejecting overly detailed processes, and relying instead on hiring the best and relying on their judgment to do things right. What they get absolutely right is that it's most often wasteful to institute a process to prevent correctable mistakes. The only mistakes to avoid are the absolutely catastrophic ones. The rest are best recovered from.

Since a process-driven culture drives out superstars, Netflix takes the opposite approach. As complexity increases, they try to hire more superstars to handle it, rather than relying on processes.

In an environment filled with such superstars, a command-and-control approach to management would not work, so they rely on "setting context" and letting things develop in what they call an "aligned, but loosely coupled" environment.

And to keep those superstars happy, they have a "top-of-the-market" pay policy. No wimpy "average-performance-gets-average-pay" policies for them. Average performance gets you a "generous severance package" while star performers get top-of-the-market salaries - in cold cash.

Unfortunately, all this doesn't seem scalable, and that's the primary objection most people have to that model. Netflix asserts that they're actually able to scale the model in spite of general skepticism. Without inside information, I cannot comment on that beyond taking it at face value. For what that's worth, Google states that Netflix has 1883 employees as of Q1 '10. That's a substantial amount of scaling for a model like that!

Quotable quote:

Netflix Vacation Policy and Tracking
“there is no policy or tracking”
“There is also no clothing policy at Netflix, but no one has come to work naked lately.” – Patty McCord, 2004