artifical intelligence · Culture · decision making · Learning · Philosophy · politics · Psychology

21 lessons for the 21st century by Yuval Noah Harari

  • The book picks up on several themes that I think are very important for understanding where the world is trending over the coming years.

    Politics

    • Disillusionment picks up on the rise of anti ellitest autocratic and populist rulers (connections to The Demise of Western Liberalism by Edward Luce).
    • Issues of identity, nationalism clash with global problems. Identity and the definition of your tribe are themselves changing rapidly in today’s world.
    • Immigration also poses growing challenges in many parts of the world, both to the countries from which people are departing and those to which they are aiming to immigrate to.
    • Traditional democracy offers no solutions to the global technological disruption and ecological challenges we are facing.
    • All the existing human tribes are absorbed in advancing their particular interests rather than understanding the global truth.
  • Many are writing about the potential impact of AI on jobs in future (connections to Deep Thinking by Gary Kasparov). Yuval draws out some interesting insights:
    • In the past machines competed with humans in raw physical abilities, while humans retained an immense edge over machines in cognition. AI has the potential to change that.
    • In the future machines will become better at analysing human behaviour and predicting human decisions. (Already happening with social media’s ability to draw and captivate us). AI May out compete us in jobs that require intuition about other people, it may be able to more accurately assess people’s emotional states.
    • AI gets its power and ability to outcompete us not from replacing a single human but through integrating the experience of millions in a single network. AI cars will have far more driving experience than any human. AI doctors similarly. Healthcare could become far better and far cheaper.
    • What jobs will be more immune from relegation? Jobs that require a wide range of skills and an ability to deal with unforeseen scenarios. Human care for young, sick and elderly will probably remain a human activity. Human creativity is often lauded as the area AI will least impact but there he argues as AIs get to understand what touches human emotion they will start to impact this.
    • The idea of human being augmented by machines in all of these areas will inevitably be correct, hopefully greatly improving productivity but continuing the acceleration of change.
    • What do we do to try to create enough new jobs? Will governments create effective retraining programs? How will we cope with the psychological challenges of having to retrain multiple times in our careers?
    • And what happens if job losses far outstrip job creation? What if we get to the point where a large portion of society just don’t have much of a relevant role to play in the work that is economically valued and paid for?
    • What sort of changing social policies will we need eg. Universal Basic Income and what sort of tax policies if the value creation is owned by a few large data owning corporations?
    • Will we start recognising the enormous value of jobs that are not currently paid for such as careers and parenting?
    • Can we envisage a society where work is not where most people find their meaning and purpose? How will we pay for that?
    • Human happiness depends less on objective conditions and more on our own expectations, and how we compare our condition to those of other people. How will we adjust our expectations in this new world.

    The other big questions he raises

    • How do we regulate the rise of big data and protect freedoms, who owns the data (see Kasparov’s comments about us sacrificing our privacy for service willingly, and the need for transparency from the big data owners)
    • What does terrorism look like in future?
  • On spirituality, ethics, secularism and religion
    • The future of spirituality, our concept of God, the contradictions between religions preaching individual humility but exercising collective arrogance in its exclusive demands. Marrying this with secularism and science, a seeking of objective truth, the development of secular ethics around concepts such as compassion, equality, freedom, courage.
    • “Questions you cannot answer are usually far better than answers you cannot question.”
    • But even secular movements repeatedly mutate into dogmatic creeds, especially in times of war or economic crisis where societies must act promptly and forcefully. Eg. communism’s of capitalism both become dogmas. Even the right to freedom can become a dogma against all censorship. At some point in time a search for objective truth is circumvented by the desire for expediency and simplicity.
    • “Every religion, ideology and creed has its shadow, and no matter which creed you follow you should acknowledge your shadow and avoid the naïve reassurance that ‘it cannot happen to us’.”
  • On truth and power
    • Ignorance: you know less than you think. “People rearely appreciate their ignorance, because they lock themselves inside an echo chamber of like minded friends and self confirming news feeds, where their beliefs are constantly reinforced and seldom challenged.
    • Providing people with more and better information is unlikely to improve matters. Most of our views are shaped by communal groupthink rather than individual rationality, and we hold these views out of group loyalty. Bombarding people with facts and exposing their individual ignorance is likely to backfire.
    • “If you want to go deeply into any subject you need a lot of time, and in particular the privilege of wasting time. You need to experiment with unproductive paths, to explore dead ends, to make space for doubts and boredom, and to allow little seeds of insight to slowly grow and blossom. If you cannot afford to waste time you will never find the truth.”
    • Power inevitably distorts the truth. Power is all about changing reality rather than seeing it for what it is.
    • Power depends on creating and believing fictions. We are the only mammals that can cooperate with numerous strangers because only we can invent fictional stories, spread them around, and convince millions of others to believe in them. As long as everybody believes in the same fictions, we all obey the same laws, and can thereby cooperate effectively.
    • For better or worse, fiction is among the most effective tools in humanity’s toolkit. By bringing people together religious and cultural creeds make large scale human cooperation possible. The power of human cooperation depends on a delicate balance between truth and fiction.
    • As a species, humans prefer power to truth. We spend far more time and effort on trying to control the world than on trying to understand it – and even when we try to understand it, we usually do so in the hope that understanding the world will make it easier to control it.
    • How to avoid fake news? If you want reliable information, pay for it. If some issue seems exceptionally important to you, make the effort to read the scientific literature on it.
  • On education
    • You will need to reinvent yourself again and again in order to keep up with the world.
      To survive and flourish in such a world you will need a lot of mental flexibility and great reserves of emotional balance. Unfortunately teaching kids to embrace the unknown and keep their mental balance is far more difficult than teaching them a physics equation.
      People don’t need more information, they need the ability to make sense of the information, to tell the difference between the important and the unimportant and to combine many bits of information into a broad picture of the world.
      What should we teach: critical thinking, communication, collaboration and creativity
      To do this you need to work hard on knowing who you are, and what you want from life, know thy self.
  • How do we usually get to know ourselves? The power of stories
    • We usually do this by telling ourselves stories to give meaning to our lives. My story must give me a role to play, and it must extend beyond my horizon, giving me an identity and a meaning to my life by embedding me in something bigger than myself.
      However when you believe a particular story, it makes you extremely interested in its minutest details, while keeping you blind to anything that falls outside its scope.
      Often we want our personal story to carry on beyond death, either through religious reassurance or through something tangible in either cultural or biological form.
      Why do people believe in these fictions? One reason is that their personal identity is built on the story. By the time their intellect matures they are so heavily invested in the story, that they are far more likely to use their intellect to rationalise the story than to doubt it. Most people who go on identity quests are like children going treasure hunting. They find only what their parents have hidden for them in advance. Second, not only our personal identities but also our collective institutions are built on the story. Once personal identities and entire social systems are built on top of the story, it becomes unthinkable to doubt it, because its collapse will trigger a personal and social cataclysm. Once you suffer for a story it’s usually enough to convince you that the story is real. And in following our own story we may even inflict suffering on others. We do not want to admit either that we are fools or villains and so we prefer to believe that the story is true.
      Throughout history almost all humans believed in several stories at the same time, and whenever absolutely convinced of the truth of any one of them. This uncertainty rattled most religions, which therefore considered faith to be a cardinal virtue and doubt to be amongst the worst possible sins. With the rise of modern culture the tables were turned. Faith looked increasingly like mental slavery, while doubt came to be seen as a precondition for freedom.
      Modernity didn’t reject the plethora of stories it inherited from the past. Instead, it opened a supermarket for them. The modern human is free to sample them all, choosing and combining what ever fits his or her taste.
      One common modern story is the Liberal story. Like all of the cosmic stories, the liberal story to start with a creation narrative. It says that the creation occurs every moment, and I am the creator. What then is the aim of my life? To create meaning by feeling, by thinking, by desiring, and by inventing. Anything that limits the human liberty to feel, to think, to desire and to invent, limits the meaning of the universe. Hence liberty from such limitations is the supreme ideal.
      In order to understand ourselves, a crucial step is to acknowledge that the ‘self’ is a fictional story that the intricate mechanisms of our mind constantly manufacture, update and re-write. There is a storyteller in my mind that explains who I am, where I am coming from, where I am heading to, and what is happening right now. And like government Spin Doctors, the inner narrator repeatedly gets things wrong but rarely, if ever, admits it. My inner propaganda machine builds up a personal myth, with prized memories and cherished traumas that often bear little resemblance to the truth.
      We humans have conquered the world thanks to ability to create and believe fictional stories. We are therefore particularly bad at knowing the difference between fiction and reality. Overlooking this difference has been a matter of survival for us.
  • Philosophy and the final frontier: our minds
    • In Yuval’s view the big question facing humans is not “what is the meaning of life?” But “how do we get out of suffering?” (Vs Victor Frankl who looks to find meaning even in suffering). He believes “suffering is the most real thing in the world”.
      He goes on to discuss how he can, as a sceptic still wake up cheerful in the morning.
      He turns inward on himself in mindfulness meditation.
      How does one study the mind? The only mind I can directly observe is my own. If I cannot observe some external thing without bias, how can I objectively observe my own mind? But the only tool available is meditation: the direct observation of one’s own mind.
      “The most important thing I realised was that the deepest source of my suffering is in the patterns of my own mind. When I want something and it doesn’t happen, my mind reacts by generating suffering. Suffering is not an objective condition in the outside world. It is a mental reaction generated by my own mind. Learning this is the first step towards ceasing to generate more suffering.”
      Serious meditation demanded minutes amount of discipline. If you try to objectively observe your sensations, the first thing you notice is how wild and impatient reminders.
      We had better understand our minds before the algorithms make our minds up for us.
    Business culture · decision making · Learning · Philosophy

    Deep Work by Cal Newport

  • The basic idea behind this book is that in an age of increasing distraction, being able to really concentrate and do deep focused work is a super-power. He spends the first half of the book explaining why he believes this is the case and the second half offering some really pragmatic strategies for achieving this.

    Deep work is completely undistracted, focused problem solving, in a state of “flow”, where we do our most meaningful work. We can only really achieve this for between 1 and at most four hours a day. But very few of us achieve even the one hour, true deep work is rare. Mos to the time spent responding to emails, in meetings etc. Is not facilitating deep work. Most of us proxy business for deep work, they are not the same thing.

    His key insight is: developing a deep work habit is to move beyond good intentions and add routines and rituals to your working life design to minimise the amount of your limited willpower necessary to transition into and maintain a state of unbroken concentration.

    He sets out 4 depth philosophy’s

    1. Become a monk. Set your entire life up to minise distraction and do only deep work

    2. Become a monk some of the time: A bimodal philosphy where for parts of the year you are able to become completely isolated and work intensely

    3. Have a rhythmic schedule to doing deep work every week, clear well defined periods where you will be uninterrupted – this is probably the most practical for most of us

    4. Journalistic approach, jumpy into deep work with every spare minute of time, as journalists are trained to do because they often work to tight deadlines. The main challenge here is the context switching which makes getting into a deep work mindset very challenging.

    He then has a series of very practical suggestions to maximise your deep work and its impact.

    Ritualise your deep work

    • Have a specific place to do deep work
    • Decide for how long you will do it, and don’t be over ambitious to begin with
    • Decide how you will work eg. Ban internet and email completely, have a cup of coffee before hand
    • Keep track of how much time you actually do it, in a clear visible place eg. On a calendar, see if you can build up a habit of tracking and expanding the time you do deep work
    • Commit to it with grand gestures eg. Money, time commitment, public commitment, stuff that will make you more psychologically committed to achieving it.

    Interestingly he is not saying it has to be in complete isolation. There are many examples of good collaboration producing meaningful work and often improving the quality of thinking but this probably comes through an approach of coming together meaningfully and then separating out meaningfully again.

    Don’t just know what you need to do, also focus on how you will execute.

    • Focus on the wildly important. Identify a small number of ambitious outcomes to pursue with your deep work don’t try to do too much.
    • Focus on lead measures, not the results. Lead measures are the things that you can control that drive success that create the output eg. The time you spend on deep work.
    • Keep a scoreboard
    • Create a cadence of accountability: confront the scoreboard, with a team eg. A weekly review, identify when it went well and when it went poorly why and what could be done to improve it.

    He also emphasise the need to create mental space around the deep work. When you work, work hard, when you are done be done.

    • Down time aids insights, give you unconscious mind time to untangle more complex problems
    • We suffer from Attention fatigue. Having walks especially in nature very helpful. Exercise probably has a similar effect, Having “inherently fascinating stimuli” that fascinate the mind but do not tax it in terms of directed concentration and decision making is very restorative to the mind
    • Have a shutdown ritual: as you complete your work day, identify incomplete tasks, capture them where you can and let you brain know that you have a plan for how to complete it, and then ritualise leaving your work behind you and switching off to it.
    • Embrace boredom and specifically here, don’t fill it up with constant stimuli, overcome our desire for constant distraction. People who multitask all the time cannot filter out irrelevancy. We are wired for distraction and crave it, more so in the social media age. His specific recommendation here is to “schedule the occasional break from focus to give into distraction” rather than let distraction be the default in our down time. Eg. Schedule when you watch Tv or browse the internet or check the news.

    Other suggestions

    • Work with intensity like Teddy Roosevelt: schedule high intensity work and give yourself a drastically shorter hard deadline than you would ordinarily give yourself to get the task done, though it must still be feasible. Do this only once a week to begin with and then systematically increase it.
    • Productive meditation: take a period when you are occupied physically but not mentally eg. Walking, showering, exercising, and focus your attention singularly on a well defined problem you are working on, and specifically what part of it you need to think through next. When your mind wanders away from it bring your attention back to it.

    He then makes various suggestions to limit the impact and time spent on shallow work or not important goals

    • Select the tools (specifically networking and digital information tools) that you use very carefully to maximise your chances of success at your key goals. Identify your key goals and the factors that will determine success and adopt a tool only if its positive impacts substantially outweigh the negative.
    • 80 % of your productivity comes from 20 % of your activity/tools etc. Cut out the other 80 % ruthlessly to allow more time on the 20 % that makes the biggest difference. Eg. Cut out social media

    Manage your schedule ruthlessly

    • Put more thought and structure into your leisure time evenings and weekends.
    • Schedule every minute of every day. That does not mean you have to stick to the schedule, if something else comes up that is more important, change the schedule but it forces you to be thoughtful about the day and how you are spending your time. Including scheduling time for the admin and the unexpected. This also helps improve your realism about how long different tasks take.
    • Quantify the depth of every task (how long would this task take you to teach someone else to do?)
    • Set your self very strict work time allowances and a fixed time by which you need to have finished your work day eg. 8 hours a day, finished by 5:30, once everyone has less time to get their work done they respect that time even more, people become stingy with their time and don’t waste it doing things that just don’t matter.
    • Decide what percentage of your time should be spent on shallow work vs deep work and get your boss to agree that.
    • This changes perspective:any obligation beyond your deep work objectives is potentially disruptive.

    Manage other people’s demands on your time

    • The most dangerous word in managing your productivity is saying “yes”
    • Become hard to reach
    • Manage your email
    • eg. On email train people not to expect a response and have people filter out what they send you themselves and what sort of response to expect from you.
    Learning · Philosophy · Psychology

    Book review: Man’s search for meaning by Viktor Frankl

    Viktor Frankl was a Jewish pioneer in psychotherapy. He was developing his own insights into psychology in Austria prior to World War 2. In the war he was arrested by the Nazis and transported to Auschwitz. In his book “Man’s search for meaning” he relays the experiences of surviving in a concentration camp and his insights into what motivates humans, which he gained as a result of those experiences.
    There is no way I could do justice to the horrors he experienced in the camps in a few brief lines in a blog post. I highly recommend reading the book, it’s not very long and will lend far more depth to the few excerpts I am relaying below. It is harrowing but well worth while.
    Instead I have focused on the psychological insights and some of the quotes that really struck me personally. (Please note that he tends to frame everything in the male third person, so his references are often to “man” but he means it generically as all humans, men and women). Below I put my own words and thoughts in italics and quotes from Frankl are in plain type.
    Frankl developed his own form of therapy he called logotherapy. He believed that the striving to find meaning in one’s life is the primary motivational force in man. This meaning is unique and specific in that it must be fulfilled by him alone.
    Man’s main concern is not to gain pleasure or to avoid pain but rather to see a meaning in his life. That is why man is even ready to suffer, on condition that his suffering has a meaning.
    Suffering
    In the first half of the book he describes the experience of the concentration camps. In a situation of such depravity, suffering becomes the central theme of most of the prisoners lives, and while his work focuses on meaning in the broader sense, he is particularly insightful in his understanding of human suffering.
    And while he is clear we don’t have to suffer to find meaning in our lives, most of us will probably experience some form of unavoidable suffering in the course of our lives. In that sense his insights and challenges to us are highly relevant.
    One should not search for an abstract meaning of life. The question of the meaning of life may actually be reversed. Ultimately man should not ask what the meaning of his life is, but rather he must recognise that it is he who is asked. 
    We had to learn ourselves and for the more, we had to teach the despairing man, that it did not really matter what we expected from life, but rather what life expected from us. We needed to stop asking about the meaning of life, and instead to think of ourselves as those who were being questioned by life – daily and hourly.
    Our answer must consist, not in talk and meditation, but in right action and in right conduct. Life ultimately means taking the responsibility to find the right answer to its problems and to fulfill the tasks which it constantly sets for each individual. These tasks, and therefore the meaning of life, differ from man to man, and from moment to moment. 
    Sometimes the situation in which a man finds himself may require him to shape his own fate by action. At other times it is more advantageous for him to make use of an opportunity for contemplation and to realize assets in this way. Sometimes man maybe required simply to accept his fate, to bear his cross.
    When a man finds that it is his destiny to suffer, he will have to accept his suffering as his task; his single and unique task. He will have to acknowledge the fact that even in suffering he is unique and alone in the universe. No one can relieve him of his suffering or suffer in his place. His unique opportunity lies in the way in which he bears his burden.
    For us as prisoners these thoughts were not speculations for removed from reality. They were the only ones that could be of help to us. They kept us from dispair, even when there seemed to be no chance of coming out of it alive. Long ago we had past the stage of asking what was the meaning of life, a naive query which understands life as the obtaining of some aim through the act of creation of something of value. For us, the meaning of life embrace the widest cycles of life and death, of suffering and of dying.
    Once the meaning of suffering had been revealed to us [that bearing suffering with dignity in itself gave meaning to the life and suffering], we refused to minimize or alleviate the camps tortures by ignoring them or harbouring false illusions and entertaining artificial optimism. Suffering had become a task on which we did not want to turn our backs. We had realized it’s hidden opportunities for achievement.
    There was no need to be ashamed of tears, for tears bore witness that a man had the greatest of courage, the courage to suffer.
    Frankl’s insight was that humans in these extreme situations often need a very specific reason to carry on living, “what life was asking of them”. For him it was his manuscript explaining some of the concepts of his logotherapy which had been taken from him as he entered the camp. For others it was to be reunited with a relative who needed them. 
    In Nietzsche’s words, “he who has a why to live for can bear with almost any how”.
    Each man is questioned by life; and he can only answer to life by answering for his own life; to life he can only respond by being responsible. He can only answer to life by answering for his own life.
    It’s up to him to decide whether he should interpret his life’s task as being responsible to society or to his own conscience.
    In the concentration camps we watched and witnessed some of our comrades behave like swine while others behaved like saints. Man has both potentialities within himself; which one is actualised depends on decisions [he makes] but not on conditions [that he faces].
    Optimism in the face of tragedy and in view of human potential, at its best, allows for
    1. Turning suffering into human achievement and accomplishment
    2. Deriving from guilt the opportunity to change oneself for the better
    3. Deriving from life’s transitoriness an incentive to take responsible action
    Finding meaning in life
    According to Frankl meaning can be discovered in three different ways
    1. By creating a work or doing a deed
    2. By experiencing something (eg. goodness, truth, beauty) or encountering someone (loving them)
    3. By the attitude we take towards unavoidable suffering
    In no way is suffering necessary to find meaning. I only insist that meaning is possible even in spite of suffering.
    Being human is not freedom from conditions [that afflict us], but it is the freedom to take a stand [in our attitude] towards the conditions.
    What you have experienced, no power on earth can take from you.
    Mental health is based on a certain degree of tension, the tension between what one has already achieved and what one still ought to accomplish, or the gap between what one is and what one should become.
    It is a dangerous misconception that what man needs in the first place is equilibrium. What man actually needs is not a tensionless state but rather the striving and struggling for a worthwhile goal, a freely chosen task.
    What is demanded of man is not to endure the meaninglessness of life, but rather to bear his incapacity to grasp its unconditional meaningfulness in rational terms. 
    Insights into broader psychological issues
    More and more a psychiatrist is approached by patients who confront him with human problems rather than neurotic symptoms.
    Self actualisation is possible only as a side effect of self transcendence.
    Love is the only way to grasp another human being in the most core of his personality. No one can become fully aware of the very essence of another human being unless he loves him. By his love he is enabled to see the essential traits and features in the beloved person; and even more he sees that which is potential in him, which is not yet actualised but yet ought to be actualised. Furthermore, by his love, the loving person enables the beloved person to actualise these potentialities. By making him aware of what he can be and of what he should become, he makes these potentialities come true.
    Don’t aim at success – the more you aim at it and make it a target, the more you’re going to miss it. For success, like happiness, cannot be pursued; it must ensue, and it only does so as the unintended side-effect of one’s dedication to a cause greater than oneself or as the byproduct of one’s surrender to a person other than oneself. Happiness must happen, and the same holds for success: you have to let it happen by not caring about it. I want you to listen to what your conscience commands you to do and go on carrying it out to the best of your knowledge. Then you will live to see that in the long run – in the long run I say! – Success will follow you precisely because you had forgotten to think of it.
    Our current mental hygiene philosophy stresses the idea that people ought to be happy, that unhappiness is a symptom of maladjustment. Such value system might be responsible for the fact that the burden of unavoidable unhappiness is increased by unhappiness about being unhappy.
    Happiness, faith, hope, love, optimism, laughter, success, all of these cannot be commanded or ordered or pursued; they must ensue from a reason to feel these things. Once one has a reason, these things follow automatically. A human does not pursue happiness but pursues a reason to become happy, through actualising the potential meaning inherent and dormant in any given situation.
    Practical insights
    Frankl focuses often on reframing for someone, what their life might mean if seen from a different perspective. Eg, imagining looking back on this moment from your deathbed. Imagine your life was vastly different without the situations you found your self in, would it still have the same meaning?
    People often suffer from anticipatory anxiety. It is a characteristic of this fear that it produces precisely that of which the patient is afraid. Forced or excessive intention makes impossible what one forcibly wishes. 
    For example some struggling with insomnia gets more and more anxious about not being able to go to sleep and can’t go to sleep as they attempt to force themselves to go to sleep.
    Logotherapy makes use of “forced intention” or “paradoxical intention” to address this. For example in the sleep example, a patient can be asked to focus very intently on staying awake for as long as possible. 
    In conclusion
    This is a book I would recommend to everyone. It recasts our existential quest for meaning into a much more concrete, practical responsibility to be our best in the circumstances we find ourselves, no matter how extreme.
    artifical intelligence · Computer Science · decision making · Learning · Philosophy · Psychology

    Deep Thinking by Garry Kasparov

    This book covers the rise of computers and AI over the period Kasprov’s chess career. But for me the interesting insights are into the rising impact of technology on our lives, and the roles of psychology in decision making.

    In my comments I have focused more on the takeaways I think are more widely applicable rather than on the chess focused aspects. I have replicated lots of wonderful and insightful quotes from the book:

    Chess

    It gives a fascinating insight into how much chess is a game of psychology at the elite levels.

    • Emanuel Lasker – chess is not a science or an art – it is a fight. Play the man and not the board – play the move that makes your opponent feel most uncomfortable. It’s a psychological game.

    It also gives insight into how someone like Kasparov is not just looking for the next best move but is aiming to develop an overarching strategy that he aims to adapt and customise to his understanding of his opponents strategy, be that opponent human or machine.

    He summarises the rise of Chess playing computers as a timeline: Thousands of years of status quo human dominance, a few decades of weak computer competition, a few years struggle for computer supremacy. Then game over. For the rest of human history machines will be better than humans are chess. This is the unavoidable one-way street of technological progress in everything from the cotton-gin to manufacturing robots to intelligent agents.

    The impact of technology on our lives, work and education

    • It’s far easier to tell millions of newly redundant workers to retrain for the Information Age than to be one of them or to actually do it.
    • The machines have finally come for the white collared, the college graduates, the decision-makers. And it’s about time.
    • It is callous to say that all who suffer the consequences of tech disruption should be ignored and just get over it because, in the long run, this suffering won’t much matter. The point is that when it comes to looking for solutions to alleviate that suffering, going backwards isn’t an option. A corollary is that it is almost always better to start looking for alternatives and how to advance the change into something better instead of trying to fight it and hold on to the dying status quo
    • Romanticising the loss of jobs to technology is little better than complaining about antibiotics putting too many gravediggers out of work. The transfer of labour from humans to our inventions is nothing less than the history of civilisation.
    • Educating and retraining a workforce to adapt to change is far more effective than trying to preserve that workforce in some sort of Luddite bubble.
    • We aren’t competing against our machines, no matter how many human jobs they can do. We are competing with ourselves to create new challenges and to extend our capabilities and to improve our lives. Inturn these challenges will require even more capable machines and people to build them and train them and maintain them – until we can make machines that do those things to, and the cycle continues.
    • If we feel like we are being surpassed by our own technology it’s because we aren’t pushing ourselves hard enough, aren’t being ambitious enough in our goals and dreams. Instead of worrying about what machines can do, we should worry more about what they still cannot do.
    • The desire for service wins out over a vague desire for privacy. Technology will continue to make the benefits of sharing our data practically irresistible. Our lives are being converted into data.
    • The trend cannot be stoped so what matters more than ever is watching the watchers. The amount of data we produce will continue to expand, largely to our benefit, but we must monitor where it goes and how it is used. Privacy is dying, so transparency must increase.
    • Kids thrive and connections and creation and they can be empowered by today’s technology to connect and create in limitless ways. The kids to go to school is it in brace this empowerment most able will thrive. That our classrooms still mostly look like they did 100 years ago isn’t quaint; it’s absurd.
    • The world is changing to quickly to teach kids everything they need to know; they must be given the methods and means to teach themselves. This means creative problem-solving, dynamic collaboration online and off, real time research, and the ability to modify and make their own digital tools. They are aided by how far we have come in making powerful technology easily accessible. A room full of kids can assemble their own digital textbooks and syllabus in a few minutes of drag-and-drop on a tablet collaborating from the very start.
    • Wealthy nations are approaching education in the same way the wealthy aristocratic family approaches investing. The status quo has been good for a long time; why rock the boat? I have never seen such a conservative mindset in any other sector. Not only in the administrators and bureaucrats but the teachers and parents as well. Everyone except for the kids. The prevailing attitude is that education is too important to take risks. My response is that education is too important not to take risks. We need to find out what works and the only way to do that is to experiment. The kids can handle this. They are already doing it on their own. It’s the adults who are afraid.
    • Many jobs will continue to be lost to intelligent automation, but if you’re looking for a field that will be booming for many years, get into human machine collaboration and process architecture and design. This isn’t just user experience, but entirely new ways of bringing machine-human coordination into diverse fields and creating new tools we need in order to do so.
    • To keep ahead of the machines, we must not try to slow them down because that slows us down as well. We must speed them up. We must give them, and ourselves, plenty of room to grow. We must go forward, outward, and upward.
    • We can never go back to the way it was before. No matter how many people are worried about jobs, or the social structure, or killer machines, we can never go back. It’s against human progress and against human nature. Once tasks can be better done, cheaper, safer, faster, by machines, humans will only ever do them again for recreation or during power outages. Once technology enables us to do certain things we never give them up.
    • He ends with a discussion around super intelligence and general AI. And seems to favour an argument that that is some time away, but we have lots of real challenges with the rise of AI in everyday situations today that we have still to grapple with properly.
    • This is not a choice between utopia dystopia.It is not a matter of us versus anything else. We will need every bit of our ambition in order to stay ahead of our technology. We are fantastic at teaching our machines how to do our tasks, and we will only get better at it. The only solution is to keep creating new tasks, new missions, new industries that we don’t even know how to do ourselves. We need new frontiers and then we will explore them. Our technology excels at removing the difficulty and uncertainty from our lives, and so we must seek out ever more difficult and uncertain challenges.

    Philosophy

    • The mind goes beyond reasoning to include perception, feeling, remembering, and, perhaps most distinctively, willing – having and expressing wishes and desires.
    • Pablo Picasso “computers are useless. They can only give you answers.“
    • Dave Ferrucci “computers do know how to ask questions. They just don’t know which ones are important.”
    • To know which questions are the right questions, you have to know what’s important, what matters. And you cannot know that unless you know which outcome is most desirable.
    • To become good at anything you have to know how to apply basic principles. To become great at it, you have to know when to violate those principles.
    • Larry Tesla says that “intelligence is what ever machines haven’t done yet”
    • Joseph Weizenbaum quotes: Machines can decide but they do not choose. Why does the machine do what it does? Every mechanised decision can be traced back – eventually it reaches the inevitable conclusion of “because you told me to”. For humans this is not the case and the new destination is instead “because I chose to“. With in that simple phrase lies human agency, human leadership, human responsibility, and humanity itself.
    • Better technology, smarter technology, does not change human nature. It empowers us, for better and for worse. Good people will use it for good. Evil people will use it for evil. That is why we must remember that becoming better humans will always be more important than creating smart machines.
    • Kasprov argues that our technology can make us more human by freeing us to be more creative, but there is more to being human then creativity. We have other qualities the machines cannot match. They have instructions while we have purpose. Machines cannot dream. Humans can, and we will need our intelligent machines in order to turn our grandest dreams into reality. If we stop dreaming big dreams, if we stop looking for a greater purpose, then we may as well be machines ourselves.

    Psychology, and behaviour and decision making

    • Bill Gates “we always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten”
    • Leaving your comfort zone involves risk, and when you are doing well the temptation to stick with the status quo can be overwhelming, leading to stagnation
    • No matter how much you love the game, you have to hate to lose if you want to stay in top. You have to care, and care deeply
    • A simple lack of self confidence results in decision-making that is slower, more conservative, and inferior in quality. Pessimism leads to watch the psychologists called “a heightened sense of potential disappointment in the expected outcome“ of one’s decisions. This leads to indecisiveness and the desire to avoid or postpone consequential decisions.
    • Intuition is the product of experience and confidence. It is the ability to act reflexively on knowledge that has been deeply absorbed and understood. Depression or self doubt short-circuits intuition by inhibiting the confidence required to turn that experience into action.
    • We rely on assumptions and heuristics to make sense of the complex world around us. We do not calculate every decision by brute force, checking every possible outcome. It is inefficient and unnecessary to do so, because generally we get by pretty well with our assumptions. But when they are isolated by researchers, or exploited by advertisers politicians, and other con artists, you can see how we could all use a little object of oversight, which is where our machines can help us. Not merely by providing the right answers, but by showing us how idiosyncratic and easily influenced our thinking can be. Becoming aware of these fantasies and cognitive blindspot won’t prevent them in entirely, but it’s a big step toward combating them.
    • We suffer from similar irrationalities and cognitive delusions at the chessboard as we do in life. We often make impulsive moves when careful analysis refutes our plans. We fall in love with our plans and refuse to admit new evidence against them. We allow confirmation bias to influence us into thinking that what we believe is right, despite what the data may say. We trick ourselves into seeing patterns in randomness and correlations where none exist.

    Strategy and Decision Making

    • What separates him from other strong players? Experimentation and adaptability. The willingness to take on new challenges, to keep trying new things, different methods and uncomfortable tasks
    • Hard work is a talent. The ability to push yourself to keep working, practising, studying more than others is itself a talent.
    • Focusing on your strengths is required for peak performance but improving weaknesses has the potential for greatest gains
    • Kasparov speaks regularly about the difference between strategy and tactics, and why it’s essential to first understand your long-term goals so you don’t confuse them with reactions, opportunities, or mere milestones. The difficulty of doing this is why even small companies need mission statements and regular checkups to make sure that they are staying on course. Adapting to circumstances is important, but if you change your strategy all the time you don’t really have one. We humans have enough trouble figuring out what we want and how best to achieve it, so it’s no wonder we have trouble getting machines to look at the big picture.
    • Computers use an exhaustive search algorithm. Humans use a very different heuristic when making plans. Strategic thinking require setting long-term goals and establishing milestones along the way, leaving aside for the moment how are your opponent, or business or political rivals, might respond. There are no calculations involved yet, only a type of strategic Wish List. Only then do I begin to work out whether it’s actually possible and what my opponent might do to conunter it.
    • When it comes to big innovations you have to start earlier. The earlier on in the development tree you look, the bigger the potential for disruption is, and the more work it will take to achieve. If we only rely on our machines to show us how to be good imitators, we will never take the next step to become creative innovators. If everyone imitates, soon there will be nothing new to imitate. Demand can be stimulated by incremental product diversification for only so long. It’s called innovating at the margins.
    • While using your phone isn’t cheating in real life, you might develop a cognitive limp from an over reliance on a digital crutch. The goal must be to use these powerful and objective tools not only to do better analysis and make better decisions in the moment, but also to make us better decision-makers.
    • Checklists and goalposts are vital to disciplined thinking and strategic planning. We often stop doing these things outside of a rigid work environment, but they are very useful and today’s digital tools make them very easy to maintain
    • You have to be brutally honest at objective self-evaluation. If you’re truthful and diligent when collecting data and making your evaluations, you will find you get better and better making correct estimations.

    Follow ups to read more on: Oxford Martin School, Nick Bostrom, Ian Goldin, Google’s Peter Norvig, Bridgewater’s Dave Ferrucci and of course Douglas Hofstadder.

    Business Culture · Investment · Learning · Psychology

    The emotional side of investment decision making with Jason Zweig

    Jason Zweig writes The Intelligent Investor column for the Wall Street Journal and is interviewed here by Shane Parish.

    Lots of useful stuff, starting for me from about min 26 of the podcast onwards, here are my highlights as well as some of my own complimentary thoughts:

    Financial advice

    1. One of the biggest distorting forces in financial markets comes through misalignment of incentives (eg. Brokers paid commission encourages turnover). I think this is one of the greatest truths of financial markets. Charlie Munger also points it out as one of his key mental models, never ever underestimate the power of incentives:

    I think I’ve been in the top 5% of my age cohort all my life in understanding the power of incentives, and all my life I’ve underestimated it. And never a year passes but I get some surprise that pushes my limit a little farther.

    The way you pay your financial advisor, or your investment manager, your staff, your business managers very very strongly dictates whether or not their interests are aligned with yours. He also talks a lot about how to create greater trust between advisors and their clients through better alignment of incentives

    An insight from early in my career when I worked on the financial incentive structure for a team of financial service salesmen: these incentive structures are massively powerful but also cannot remain static. Most incentive structures are not perfect. Usually when you implement a new structure to begin with it has the desired effect but after a year or two the participants understand it and start gravitating towards exploiting its weaknesses at which point in time it’s usually a good time to modify it further.

    2. It’s very hard in financial markets to tell the difference between good and bad advice. Outcomes are disperse with many driving factors, narratives are only clear in retrospect and easily misappropriated (see earlier post on Narrative Fallacy). Sometimes outcomes can take years to play out and we judge them over shorter time frames. How could you go about judging this: focus more on their process, ask for evidence that that woks in the long term rather than the short term outcomes and watch those incentives very carefully.

    3. We tell ourselves lies every day just to live life effectively, to get ourselves out of bed and moving forward. We think we are better than average at almost anything we do otherwise why get out of bed and do anything? We believe in a “Just world” (a psychological paradigm/theory propagated by Melvin Lerner): The underlying belief we have is that most of us are “good” and good things happen to good people, bad things happen to bad people and that we will get what we deserve. If you are a good investor (you do the right things diversifying your portfolio, controlling costs etc) you will get a good outcome. We are devastated when that illusion is stripped away, when bad things happen to good people and we conclude that they must have been a bad person in some way:eg. a bad outcome for a good investor, or a crime committed against a person; we can often be influenced by this set of beliefs to rationalise that the victim/good person must have done something to deserve the outcome. The financial crisis of 2008 stripped away this illusion vey completely where investors followed “good” advisors and lost a lot of money and Jason believes this has broken down a great deal of trust between financial advisors and their clients. (see minute 42 onwards)

    Investment decision making

    4. Your decision making needs to be evidence based, not intuition based wherever possible. However you also need creativity to see the connections that others do not. These two are in a bit of tension.

    5. He gives an absolutely brilliant definition of risk:

    Risk is the difference between what investors think they know and what they end up learning about their investments, about financial markets, and about themselves.

    But he glosses over discussing this. The reason I think it is so brilliant is it encapsulates three different types of risk we face when we make investment decisions

    A. The investment itself turns out to be different from what we expected eg. Earnings disappoint, cashflow disappoints and it goes bankrupt

    B. It may be that the investment performs exactly as they expect fundamentally, but financial markets end up pricing it way different from what they expected. Eg. Nominal economic growth is 4 % but bond yields are only 2.5 %, to highlight the thing investors have been most surprised by in the last decade: how low bond yields can go and stay

    C. And most importantly, about ourselves. About our emotional reactions to losses, our ability to remain rational during periods of pain. Most of us suffer from tremendous loss aversion, as behavioural economists would call it.

    6. The power of not trading. “Both buying and selling are a form of hubris” believing that you know more than other people, or that you have some unique insight into a situation. I am pretty sure this does not apply to every investor as I have seen some very effective investors operate with a very active style but there is definitely a difference between knowing when to act and when you are just reacting to the noise.

    7. Minimising risk by simply not being overconfident in your views, a very powerful way of ensuring you don’t blow up, don’t put everything on one bet,

    8. To flourish in a bear market you need two things: cash and courage. So going into a bear market you need to make sure you have the cash otherwise there is no chance to have courage. This is not easy, very few institutional investors ever raise cash, they tend to remain fully invested. And there are many situations in bear markets where institutional investors are not given the option to invest because either their clients are panicking or because they have not managed their liquidity and risk appropriately. And in the midst of a bear market it’s very difficult to have courage. Great quote from Benjamin Graham on the subject from the depths of the 1932 crash:

    Those with the enterprise lack the money, and those with the money lack the enterprise to by buy stocks cheap

    9. Needing to know your own temperament and understand your own emotions is absolutely essential as an investor.

    To be a good investor you need independence, scepticism, good judgment and courage. Easier said than done.

    In his opinion the best investors are “inversely emotional”. They need to be a little on the autistic spectrum: able to see that others are experiencing severe emotions but able to detach themselves from that emotional gravitational pull and go in the opposite direction. Again interesting examples of Benjamin Graham being described as “Humane but not Human”, Charlie Munger as being simply “rational”.

    10. So if you are a regular human being, not on the autistic spectrum, can you teach yourself to be “inversely emotional” like this?

    It’s not easy. You have to put policies and procedures in place to help manage the emotions. If you are an alcoholic you don’t walk past the bar on the way home. So avoid stimuli and shut off noise that could distract. Focus on and listen to analysis that’s rational and unemotional. How do you put the right governors in place to manage the emotions during a decision making process? To avoid the temptation to react to short term performance and pain of loss but not to be complacent either? To avoid the enthusiasm of a new idea and seeks the world might be different going forwards from the past even when past patterns are different.

    Danny Kahneman says its very difficult to do as an individual but it may be possible to do as an organisation with the right structures in place.

    If it is possible to do as an organisation, I suspect it is still very very difficult to do, and most will fail. That is because it takes much more than structure, though structure is a prerequisite. It takes an incredible culture. That’s because the the pressures to conform with a crowd are already operating at a small number of people, it’s hard to be independent and diverse even among a group of colleagues. To not be swayed by the myriad of cognitive biases we each have interacting with each other is a big challenge. Not to allow group think to quickly dominate an idea.

    We will have to work very hard at establishing the culture as one that is both creative, but also evidence based and rational rather than driven by emotions which are the natural drivers of many of our actions at a level we ourselves may not even be aware. We need to have good mental hygiene! How to do this practically is, I think this is the topic of a whole separate blogpost!

    11. Once again value of history, really understanding the lessons of history. Be a student of financial history!

    Here is the link to the podcast:

    Listen to Elevate Your Financial IQ from The Knowledge Project with Shane Parrish in Podcasts. https://itunes.apple.com/gb/podcast/the-knowledge-project-with-shane-parrish/id990149481?mt=2&i=1000354857225

    Learning

    Edward Luce’s The Retreat of Western Liberalism

    This book is a sobering read.

    Luce’s hypothesis is that the world liberal elite “ruling classes”, particularly on the left, have lost touch with the heartland of their countries and that, together with new developments in technology and the rise of China, this is leading to some tectonic shifts in geopolitics which are evidenced in phenomena like the election of Trump and the vote for Brexit. Luce makes a strong case that in the world, liberal democracy is on the decline, and that unless leaders come to truly grasp and understand the malaise that has led to these events, then we may fail to protect Western ideals of democracy. In Russia, China and many other places in the world, there is nothing inevitable about the rise of democracy, or progress to human liberty and individual freedoms, as we tend to believe in the West. The potential failure of Western democracy may just be a return to much longer-term pre 20th century norms.

    My sense in reading it, is that he is starting to weave together several themes that will be essential to understanding the world over the decade to come, and therefore essential to navigating the coming years from an investment and political perspective.

    This post is longer than usual since it’s about a complete book and not a podcast. Basically I have sought to précis my main takeaways of the book, either by summarising them in my own words or by liberally quoting Edward and the people he quotes. He is a eloquent journalist and I am certainly a new fan, so anything eloquent you read is almost certainly his wording. As you read this please realise that these are my interpretations of his ideas, and not necessarily my own views on life or an accurate representation of his views. To frame his views, he is clearly not a fan of Trump and appears to focus mostly on politics from a liberal and left perspective. Where I have discussed my own ideas or views, I have written these in italics.

    In the first part of the book he sets out how the golden era of Western democracy rose up over the 20th century and puts that into wonderful historical context.

    The rise of China and India today are less a revolution and more a restoration – a return to normality after a two century interlude, before which Europe and the West were tiny and the East was the dominant contributor to global GDP and trade. During the industrial revolution we had massive movements from agriculture to industry, from the country side to the cities, from Europe to the new world, accompanied by massive economic growth but rising inequalities.

    Then in the early 20th century you started having the introduction of more social saftey nets and a social contract. This lead to the growth of the middle classes. The golden era of Western middle class income growth was in the period from 1940 to 1970 with median growth of 2 to 3 pct and high productivity. However that has now changed in subsequent decades, as productivity has fallen except for a brief period in the 1990’s (productivity is a huge topic I want to explore in future posts).

    He explains how globalisation has meant strong economic growth at headline levels but how beneath the surface that is increasingly unequal. Since 2009 the US economy has grown GDP by 2 percent per year but it took 6 years to get median income back to the same level as pre the Global Finical Crisis. By contrast much of the developing world has grown incomes at a healthy rate over the period. He discusses at a global level how the gap between the very wealthy and the median or poor has grown tremendously. The median household in the West still enjoys a far better lifestyle than in the developing world, but their income growth has stagnated and the gap is closing. In the 1950s it took the median US worker 45 hours to earn the income to pay the rent for the month in a big city in America. Today is takes 101 hours.

    Adam Smith, the father of economic theory, sets out in his Theory of Moral Sentiments that capitalism works best in societies where there is a high level of trust between participants. There is a psychological importance to possessing faith in a better future. As their personal experience of income growth slows but income inequality increases, people feel less like everyone in society is in the same boat together. Ironically it is today’s millennial who are most accepting of the new status quo. For the generation slightly older than them, its much more difficult since they have high expectations set by the fact that they saw their parents circumstances improve so much, they expect that to continue.

    The Western political elites have a narrative of an ideal meritocracy. A British sociologist Michael Young coined the term meritocracy in a 1958 book about an imagined ruling class of the future. The belief of the meritocrat is that they owe their success only to effort and talent, that luck and social background have nothing to do with it. However, for many outside this lucky elite, they see the economic system as self perpetuating, keeping them where they are. The growth of the working class means more and more people feel like they are shut out of society. The ‘meritocratic’ elite can be insufferably smug, while the unluck majority can easily become demoralised by being looked down on by people who have done well for themselves.

    In contrast to the industrial era, today’s inequality is accompanied by declining mobility, both geographically and socio-economically.

    He makes some fascinating observations about how the worlds global cities are changing. 50 years ago people abandoned city centres where crime was high for the suburbs. Today that is reversing, gentrification and renaissance of the city centres has lead to increasing home prices and a move of the wealthy back from suburbs to the city centres, and pushed the poor further and further to the periphery of the suburbs, requiring longer commute times to multiple part time jobs. In US cities since 2000 murder rates in city centres have dropped 16.7 % while the they have risen by 16.9 % in the suburbs.

    Western metropolises often have more in common with their global counterparts than their national hinterlands. These cities used to be regional locomotives, linked to the surrounding geographies, consuming the country side’s produce and raw materials and converting them to products. Now they are parasitic on that surrounding country side. Chicago and London are sucking the best and brightest talent from the surrounding countryside as it plugs them into the global economy. Their success is no longer symbiotic with the countryside, it comes at its expense.

    And as the cities get more expensive the middle classes find it increasing hard to keep up with rising costs and those with fewer qualifications find themselves shut out. The more fortunate inhabitants pay lip service to a progressive world view but how they spend their money is not progressive: the more liberal a cities politics, the higher the rate of inequality; consider London, San Francisco and New York. The city’s essential workers, service workers like police officers, and school teachers are priced out of living in the town, replaced by wealthy cosmopolitans who often divide their lives between different locations. Vast swaths of the city consists of unoccupied investment properties. And the new residents lock in their investment gains by supporting legislation to restricting land use which keeps property values high. Cities are becoming too successful for their own good. They have been the engine rooms of the new economy, embracing the diversity necessary to attract talent. Yet they are squeezing out income diversity, and so they shut off the opportunity for many to escape their less fortunate circumstances as new ghettos develop on the outskirts of the cities.

    He also believes that the forces of artificial intelligence and “remote intelligence” are likely to further many of these trends. “One of the bedtime stories we tell ourselves is that technology is everybody’s friend”. Some have a view that this will lead to great abundance, new forms of work hitherto unimagined and greater leisure time. It will, but will we be paid for such work as we are in today’s world?

    Many young people are advised today to “get an engineering degree” but this is no guarantee of remunerative employment for the masses: a third of Americans with science, technology, engineering and maths degrees are in jobs that don’t require any such qualification. Many programmers are working as office temps and fast food servers. In the age of artificial intelligence more and more workers will drift into obsolescence. The latest AI driven technological revolution may be different from previous ones that affected only certain sectors, todays revolution is more general purpose: few jobs will be immune. Profits at companies may soar but this value may not accrue to wider society. In 2006 Google bought YouTube with 65 employees for $1.65bn, $25m per employee. In 2014 Facebook bought WhatsApp with 55 employees for $19bn, a staggering $345m per employee. Facebooks data servers require one human technician for every 20,000 computers. The wealth is being distributed between very few individuals.

    By skewing the gains of the new economy to a few, robots/technology weakens the chief engine of growth: middle class demand. As labour becomes expensive relative to machines, spending power falls.

    Technology is often treated as a separate force from globalalisation. In reality they are the same thing. Blue collar workers over the last generation were affected by the shift of routine physical tasks from the West to the factory floors of the developing world, enabled by the relentless drop in the cost of transporting goods (first by steam, then by aeroplanes, supertankers and mechanised ports). The explosion of communications technology this century is enabling Western companies to do precisely the same in the knowledge economy today.

    In the short term it is not artificial intelligence the West should worry about but “remote intelligence”. Remote intelligence is the ability to apply intelligence from a distance: your doctor may not to have the same room with you or even in the same country if they are able to operate from a distance. The next generation of offshore jobs will be devoted to more complex tasks, like medical diagnosis, writing legal briefs and remotely supervising factories and plants.

    Rapid leaps in language translation software are opening up whole new areas. These days you speak to a computer system rather than an Indian call centre. The individuals dealing with the query may not be able to speak your language at all and still be able to deal with your query.

    How far will it go? Much further than we think. Between 25 and 33pct of the labour force in Britain, the US, France and Spain are already independent workers (self employed part or full time). This sort of employment accounts for almost all job growth since the Global Financial Crisis. And the gig economy is not just dominated by millennials. Britain has more pensioners doing independent work than people under thirty. As the real value of pensions and social security goes down, the pressure to postpone retirement grows. These new economy jobs are generally less secure with fewer benefits than traditional jobs.

    Jaron Lanier calls the big firms cornering the consumer data market the ‘siren servers’. In exchange for access to social media, we surrender more and more of our personal data for free, like sailors being lured onto the rocks. This data is the heart of the wealth creation in these new technology businesses. The exchange is increasingly one sided as many of our jobs are squeezed by this invisible bargain and our earnings never seem to rise. Lanier says, ‘the dominant principle of the new information economy, has lately been to conceal the value of information. Ordinary people will be unvalued. While those closest to the top computers will be hyper valuable.’

    Henry Ford in the 1920s raised the wages to factory workers to $5 a day, with the idea that by creating a middle class income, more would be able to afford his cars. In the 1950s he began to invest in automation. On a tour of the plant with Walter Reuther, the auto union leader, Ford pointed at the robots and said ‘How will you get union dues from them?’ Reuther replied ‘How will you get [the robots] to buy your cars?’ We could ask a similar question of today’s Big Data companies as their innovation replaces swathes of middle class jobs.

    Even for the owner of the siren servers this will ultimately prove self defeating. The new economy requires consumers with spending power, just as the old one did. Big Data is gobbling up its source of future revenue. McKinsey says almost half of existing jobs are vulnerable to automation.

    The basic conclusion is a relentless downward pressure on middle class incomes. And the implication:

    Yascha Mounk and Lee Drutman, two political scientists predict that ‘the rich with live in gated compounds, that are protected by drones and connected by driverless cars. Ever smarter surveillance technology will help monitor the activities of the malcontents outside…’ As Larry Summers complains, we are witnessing ‘the development of stateless elites whose allegiance is to global economic success and their own prosperity rather than the interests of the nation where they are headquartered.’ Elites of the world unite! You have everything to lose.

    In one sense we live in a hyper-democratic world: where everyone with a grievance wields more digital power the palm of their hands than the computers than sent Apollo 14 into orbit. It made economic sense for Victorian elites to buy social peace by broadening the electoral franchise. What price are our elites prepared to pay this time round?

    Larry Summers advises governments to focus on ‘responsible nationalism’ with the idea that ‘the basic responsibility of government is to maximise the welfare of its citizens, not pursue some abstract concept of the global good.’ Global elites need to catch up with how most people view the world, not the other way around.

    The second part of the book explains the political reactions to this and what we are now seeing in our Western democracies.

    He argues that for many countries, common values are insufficient to hold them together if there is not economic growth that is broadly shared. When that growth fails, the system itself gets questioned. When that growth is monopolised by a fortunate few, the unfortunate many will turn, and in that turning will seek scapegoats. The worlds elites have provoked what they feared: a populist uprising against the world economy. He sees a world of few choices: reversal of some of the globalisation, or a practical choice of “thin globalisation” being possibly the only realistic way of salvaging a peaceful world order. The other choice he fears, but sees an increasing trend towards, is moving away from democracy towards forms of autocracy.

    This is evident in Russia under Putin, China under Xi Jinping, but many other coutries: Pakistan, Hungary, the Philippines, Turkey.

    The growth of autocracy across the globe has happened as the West and the US specifically lost leadership: in the war on terror as the West chose to cooperate with countries regardless of their human rights records, allowing many to create global terror lists which conveniently included local political opposition;the Iraq war and the aftermath of how Iraq was governed; under Obama with a confused indecisive foreign policy as the various “Arab springs” withered; and now under Trump. There are now 25 fewer democracies in the world than there were in 2000. Larry Diamond a scholar of democracy states “there is not a single country on the African continent where democracy is firmly consolidated and secure”.

    Economic performance is also no longer modelled by the US. The Global Financial Crisis in 2008 was really a Western economic crisis but China continued to grow steadily. China’s seemingly successful model of growth also brings hope. (Incidentally the “miracle growth” of China has been fuelled by a good old fashioned credit boom over the last 10 years, of a size and pace seldom witnessed before. When the rocket fuel runs out as it must, that may appear less miraculous to all)

    Andrew Nathan, a leading Sinologist says “by demonstrating that advanced modernisation can be combined with authoritarian rule, the Chinese regime has given new hope to authoritarian rulers everywhere.”

    China now gives loans to many developing countries without the West’s typical “pro democracy” strings attached. China does not seek to export revolution, its goal is to disrupt the West’s claim to democratic universalism. China’s mantra is respect for civilisational diversity – a code term for autocracy. And now we have Trump. Eric Li, a Chinese VC says “Chinese liberals are in a bind. They despise Trump. But they can’t quite bring themselves to say ‘the people are wrong’. Such an admission would not help them make the case for Western style democracy in China. After all, if the people can be so wrong, how can you give them the vote?”

    The malady in the Western liberal left’s approach lies in a detachment from the societies they had once been anchored in. Instead of UK Labour MPs from working backgrounds and factory floors, these days many (prior to Corbyn) are educated in the same private schools and the universities associated with the Conservative and Liberal Democratic parties. A technocratic mindset has gripped political elites across the Western world. While he does not make the point in the book probably because it was written slightly before the latest developments, I think it likely that, going forward, we will see even stronger support for the likes of Bernie Sanders in the US and Jeremy Corbyn in the UK, for that sense of connection back to the common man.

    He makes the point that it is very dangerous to boil the arguement down to simple xenophobic or racist views, or ethnic shoehorning like a “white backlash” for those who voted for the Trump. ”This post-mortem is convenient because it sanctions a conviction of moral superiority” amongst the leftist elite. A larger portion of Hispanics voted for Trump in 2016, than voted for Mitt Romney in 2012. Failure to diagnose the reason for Hilary Clinton’s defeat will only make Trump’s re-election more likely. A better explanation is that many Americans feel alienated from an establishment that has routinely sidelined their economic complaints. Obama offered hope. Trump channelled rage. The left has given a higher priority to ethnic or cultural identity than to people’s common interests.

    In Britain it is seen in the surge of support for UKIP. ‘They are fed up to the back of their teeth with the cardboard cutout careerists in Westminster. The spot-the-difference politicians’ said Nigel Farage. Recall Gordon Browns description of a ‘bigoted women’ when he encounters a voter concerned about the effects of immigration. But remember that a significant portion of the Asian population also voted for Brexit. People are impacted by both cuts to the welfare state and simultaneous increases in demand placed on the system by persistent immigration. On both sides of the Atlantic the younger millennial have been apathetic whilst older voters have turned out to voice their concerns.

    Plato believed that democracy was the rule of the mob, the word literally comes from the Greek words for ‘mob’ demos and ‘rule’ kratos. In his view, the mob could not distinguish between knowledge and opinion. Aristotle’s answer was to combine the rule of the knowledgable with the consent of the many.

    Edward Luce makes a distinction between the way the public typically think democracy works: the ‘folk theory of democracy’ which is a simple process whereby the people elect their representatives to carry out their instructions. Versus the realistic view of democracy, which is that democracy can only work if democracy itself is a series of tradeoffs and backroom deals governed by a system of balances of power, between individual rights, the legislature, and the judiciary. In reality there is no such thing as the popular will, just a messy series of deals between competing interests. It is hard to watch any legislature making laws without thinking that the whole business is corrupt. Yet it is the only alternative to rule by dictate.

    He makes the point that the ruling political elite don’t always love democracy, they fear the rule of the mob, and often devise ways around it. When inequality is high, the rich fear the mob and will support those who oppose or seek to constrain democracy.

    In surveys in the 1990s the wealthy backed democracy more than any of their income group in the US and Europe. That has now switched around. The poor are now democracy’s biggest fans, the rich its biggest sceptics.

    As an example, in his view, the EU is not a democracy but a complex system of anonymous committtees that set the rules for its member states, very much driven by the will of the political classes of Europe. Brussels (the EU) has delegated most of the big decisions to itself, and left little more than identity politics to its member states.

    And this, in his view is the crux of the West’s crisis: our societies are split between the will of the people and the rule of the experts – the tyranny of the majority versus the club of self-serving insiders who lead. The election of Trump and Brexit are a reassertion of the popular will. The new Western populism is an “illiberal democratic response to undemocratic liberalism imposed by the elites.”

    So without higher growth and a fairer distribution of that growth, the return of radical politics looks set to continue.

    There are also some very interesting insights into technology’s role in these events. We all have a utopian hope that new technology will bring new unity to the world. In the 1850’s the telegraph was proclaimed as the great unifier of humanity: ‘It is impossible that old prejudices and hostilities should any longer exist,’ said an editorial in the New Englander. Guglielmo Marconi, an early radio tycoon said ‘the coming of the wireless era will make war impossible, because it will make war ridiculous.’ Churchill, Roosevelt, Stalin and Hitler all mastered those mediums. Today the internet is just the same, in 1996 Nicholas Negroponte, an early evangelist for the internet said ‘the role of the nation state will change dramatically and there will be no more room for nationalism on the internet than there is for smallpox.’ Today Trump’s use of the internet is no different to previous media eras. Fake news of fake facts? What if his followers do not care? What if middle America has become so cynical about the truth that it will take its script from a political version of pro wrestling? One journalist summarised the two opposing views of Trump during the election campaign : “the press take him literally but not seriously, his supporters take him seriously but not literally.” It turns out both were wrong. Trump should have been taken seriously and literally.

    Manipulation of the media is crucial. In Russia ‘the new Kremlin won’t make the same mistake as the old Soviet Union did: it will never let TV become dull. Like London, more than half of Moscow voted against Putin. But Putin’s mastery of reality TV, an industry that is scripted by the Kremlin, and by it business acolytes, outweighs what ever cynicism he generates in the cities.

    So will the balance of powers in the US defend democracy at this time? With Trump in the presidency, what about congress and the judiciary? The panoply of intelligence and national security agencies which always seem to grow no matter which administration is in office – has run rings around Congress for years. Although Congress is supposed to oversee their activities, they rely entirely on the agencies themselves to keep them informed. And on the judicial front, “there is nothing to stop a US president from ignoring the courts. Pretending otherwise has been the civic duty of almost every US president baring Nixon.” Presidential constraint is the most essential ingredient in the proper functioning of the American system.

    As time goes on, the true populist loses patience with the rules of the democratic game. The countries constitution gets rewritten and laws can be changed. Particular examples include Hungary under Victor Orbán. A true populist is not just opposed to the elites, he is also an enemy of pluralism. The true populist claims to speak exclusively for 100percent of the true people. Only they can know the identity of the true people. ‘The only important thing is the unification of the people – because other people don’t mean anything’, said Trump.

    The West has forfeited much of its prestige. As Western democracy has come into question so has hits global power. The worlds centre of gravity, meanwhile, is shifting inexorably towards the east.

    The third part looks at the implications of declining US and Western hegemony on the world stage.

    Keynes commented in 1938 as he looked back on the period just prior to World War One (the Great War) that the average middle class Englishman believed that “life offered, at low cost and with the least trouble, conveniences, comforts and amenities beyond the compass of the richest and most powerful monarchs of other ages. Comfortable Edwardians regarded this state of affairs as normal, certain, and permanent, except in the direction of further improvement, and any deviation from it as aberrant, scandalous, and avoidable. We were not aware that civilisation was a thin and precarious crust erected by the personality and the will of very few, and only maintained by rules and conventions skilfully put across and guilefully preserved.” Like today, people believed that ever deepening ties of commerce rendered the idea of war irrational. It was thus unthinkable. People had grown complacent after decades of peace (but for periodic colonial wars). The last real clash between ‘civilised powers’ had been more than 40 years before. Much like our generation, people at the time were unlikely to have had any real experience of direct conflict. Just as we exult in our Apple products and artisanal coffee, so Keyne’s generation revelled in their Darjeeling tea and the internal combustion engine. Sounds awfully like today.

    But the loudest echo according to Luce is geopolitical. It’s what historians call the Thucydides trap: the response of Sparta to the rise of Athens. How does an incumbent established power respond to the rise of a potential challenger? A Harvard study of 15 such instances since 16th century found that 11 culminated in war. In the late 19th century it was the rise of Germany when Britain was the worlds superpower. Luce finds many parallels in the relationship between China and the US today. The Obama administrations pivot towards Asia was aimed at containing China whose military power is expanding rapidly.

    To China, Taiwan is the key component and objective. China wants reunification of Taiwan with the mainland and the US is committed to a One China policy. In 1996 the US seemed to weaken its commitment to this and Lee Teng-hu, Taiwan’s president with potentially separatist tendencies, was invited to speak in the US. Beijing launched a series of ballistic missed tests in the Taiwan Straight. President Clinton ordered two US aircraft carriers, into the region and the USS Nimitz patrolled the Taiwan Straight. China backed down and Lee won a thumping reelection the next year. Drawing the obvious conclusions from the setback, China embarked on a military modernisation program, including anti-ship missiles, nuclear submarines and its own aircraft carrier. As a result, a decade later, America no longer wields undisputed sea control over China’s neighbourhood.

    The chance that Trump will casually threaten China and get pulled into a dynamic that he can not control should be taken very seriously. The key to good diplomacy is to put yourself in your opponents shoes. Even Trumpts vastly better informed predecessors found it hard to see the world from China’s point of view. For China, the transfer of power in Hong Kong from Britain in 1997 closed the curtain on a “century of humiliation”. China has a deep routed desire to be treated with respect and dignity. China’s incentive to maintain Hong Kong’s relative freedoms has less to do with is obligations to Britain, than with convincing Taiwan that its way of life would be secure under China’s rule. Taiwan is the big prize. Washington is the obstacle.

    By cancelling the Trans Pacific Trade Partnership (which did not include China), Trump has driven Americas regional allies into China’s arms. Even Australia is now looking to join China’s rival Regional Comprehensive Economic Partnership. How secure to Japan or India feel with the US’s new direction?

    Trumps animating spirit is to make a demoralised American middle class feel better about itself. His goal is to channel rage, not cultivate knowledge. In doing so, he has a license to indulge his most authoritarian impulses. China is his most obvious external target. (Along with Mexico).

    China meanwhile faces its own challenges. Beijing’s legitimacy depends on continued economic growth. China’s labour force is subject to precisely the same forces of automation as its American counterparts, and suffers from even greater inequality. The potential for a populist backlash in China cannot be overlook

    Not to mention for the potential Trump to upset, and start another war, in the Middle East.

    The final part looks briefly at what’s to be done and I am afraid does not offer much solid prescription. But the prescription does start with a clear eyed understanding of what is happening.

    So there it is. How will the West cope with these shifting tectonic plates? Political uncertainty introduces much greater economic uncertainty as we look forward. Whether it is the threat of real war, trade war or radical populist domestic policies, financial markets are going to have to deal with these unfolding realities. It seems unlikely that the unprecedented low volatility of markets in recent years is likely to remain the case over the coming decade.

    Health · Learning · Psychology

    Learning how to learn

    From an Interview between Shane Parish of Farnam Street and Barbara Oakley who has recently written a book on the subject backed by years of academic research.

    How can we learn new things optimally? (This applies to both abstract ideas like math and physical skills like playing music)

    The distinction we draw between rote learning and understanding is artificial. You need both repetition and understanding, the two go hand in hand, you are building up the structure in your brain that embeds the memory of what it is and why, you understand more and deeper as you repeat it and the pattern becomes clear and embedded in our brain.

    You need both focus time and what neurologists call ‘default mode’ time. The brain consolidates knowledge and makes connections during ‘default mode’. Default mode is the mode we normally operate in when we are not focused but just operating eg. when driving, walking, exercising or eating as our mind jumps around from one thought to another, and we are aware of ourselves and our place in the world.

    Pomodor principle: Concentrate hard and focus for 25 minutes and then reward yourself by doing something else and letting the default mode happen. (The reward re-enforces the learning as something enjoyable and the change in activity allows the brain to consolidate knowledge.)

    During the focus mode, the best way to embed understanding after having read a page of material is to look away and recall the key concepts from the last page and work through them mentally. More effective than underlining or re-reading. Repetition of the the same thing like re-reading can actually be unhelpful because our brain assumes it knows and skips over rather than really connecting.

    Variety is great for the brain. There is little evidence for the idea that some people are auditory and some people are visual or kinaesthetic learners. We all learn through all of these modes. Our learning is amplified if we combine different methods, it keeps the brain engaged and excited, building the patterns. The wackier the connections the more likely it is that the brain will remember it (hence memory palace and other visualisation techniques)

    Exercise is also good at encouraging dendritic extension of neurons (the little branches on the neurons that extend to and connect with other neutrons) because of the growth factors it releases in the brain. Different views on whether it’s better to learn before or after exercise but either way it seems to help.

    Get really good sleep is essential for forming the memories properly. Sleep well.

    Business culture · Learning

    Great questions #2

    I like to collect great questions, they motivate me towards deeper thinking and insights. The questions you ask can drive change in your life. So I will be adding a more regular set of question posts to this blog to remind myself of the interesting questions I come across that I want to ask myself. (Great questions #1 was the post on asking Why 5 times)

    Episode two is a series of questions that Debbie Millman (designer, creator of the Design Matters podcast and lecturer on design in New York) asks of her design students when they think about their careers:

    • Am I spending enough time on looking for, finding and working towards winning a great job?
    • Am I constantly learning and refining my skills?
    • What can I continue to get better and more competitive at ?
    • Do I believe I am working harder than everyone else? If not what can and should I be doing in order to be able to accomplish that?
    • What are the people who are competing with me doing, that I am not doing?
    • Am I doing everything I can, every day, to stay in career shape? If not what else should I be doing?

    What to ignore or not do in her opinion:

    • Don’t try to be a people person. Have a point of view, share it meaningfully, respectfully and with conviction.
    • She does not believe in work life balance. When your work is your calling, it is a labour of love. You don’t count the minutes. Work can be a life affirming engagement. In you are in your 20s and 30s, if you want a life affirming career, you must work hard, if you don’t work harder than others you will not get ahead. If you are doing something you love you don’t want work life balance, you want to do what you love as often as possible.

    With regards to the latter, while I don’t completely agree with Debbie I understand the sentiment behind what she is saying. I think the key is her phrase, “when work is your calling”. What is “your calling” today?

    I would perhaps rephrase as: decide very clearly where your long term priorities are, what “your calling” is: which relationships are important, what are the things you love to do and want to do, and how do you prioritise those? Write down the list, and make that list a list of only the essentials: as small and focused as possible. And then go all in on these priorities: focus with real intensity on these and cut out the other distractions in your life.

    And finally, these priorities will probably change throughout your life. Mine are certainly different in my 40s from my 20s. That’s okay, be sure to reappraise them regularly. Once a year at least, once a quarter even better. I have mine written down and pinned next to my to do list so that I am reminded of them at least once a week.

    Learning · Philosophy · Psychology · Relationships

    Catherine Hoke and the need for Second Chances in society

    [The Tim Ferriss Show] Catherine Hoke — The Master of Second Chances

    This is an inspirational podcast. Catherine runs an organisation called Defy that works with prisoners in the US to give them a second chance through an intensive training program and then, after their release, support.

    I am not going to try to summarise everything because it’s so worthwhile and inspiring listening to Catherine.

    My brief takeaways:

    – the dangers of the self critical voices in our heads

    – the power of forgiving yourself, the power of forgiving others

    – getting the balance right between realism, positivity and negative self talk

    – ‎inspiration to set challenging goals and going after them

    – ‎being unafraid to contact people and keep at asking them (nicely) until you get what you want, and how to form connections with them (research commonalities)

    – ‎the dangers of having to live up to a perfect ideal in society, church or organisations

    – ‎the assumptions we make about those in prison

    – ‎what does it feel like to be an ex convict: imagine what it would be like to be identified by, and reminded of your most shameful moment every day of your life

    – ‎the inspiration to give something back to society and in particular, that everyone willing to own their past mistakes and wanting to change, deserves a second chance

    – ‎focusing on the 5% that you can do, that no one else can do

    – ‎writing your own eulogy as you expect it will play out on your current life course versus how you would like it to play out and what 10 changes you need to make to make that a reality?

    Listen, learn and be more compassionate towards yourself and others.

    Business Culture · Learning · Psychology · Relationships

    Givers, Takers and Matchers

    Adam Grant is an organisational psychologist who has published a book on this concept of the way individuals operate and how they then function in organisations. Organisational citizenship behaviour is the field of organisational psychology focused on behaviours that are not relevant to the task at hand but critical to the success of the effectiveness of the business: speaking up with ideas, effective team work, going the extra mile, sportsmanship, showing loyalty, helping out day to day.

    Adam hypothesises a mental model of three basic types of people driven by different values

    Givers ask “what can I do for you?”. Givers have a “trust first, ask questions later” bias or heuristic (at least to begin with in an organisation). They have a core value and belief that starts with an assumption that others will be generous. They are afraid of becoming a doormat, being taken advantage of. They are driven by values of generosity and helpfulness.

    Takers ask “what can you do for me”. They believe other people are selfish, are mistrustful and prefer to take first to ensure that they get what they want. Takers tend to believe that “other people are always out to take advantage of a situation” and even if people are well behaved suspect “opportunism laced with guile”

    Matchers tend to think “I don’t want to be too selfish, if you do something for me, I will do something for you”. They are driven by values of fairness and justice. Matchers start off more conciously thinking “I will be fair to you, and I will make sure I dont get more than I deserve but I dont get less than I deserve.”

    Most people have a default mode of operating. Lots of people do adopt a matching strategy to play it safe in an organisation, but most have a tendency towards being either more like givers or more like takers. Some matchers do take the strategy to an extreme and optimise to constantly be in a balance of fair trades which feels very transactional, does not build trust and does not optimise for the long term

    Adam wanted to understand how organisations develop their cultures and the types of people who are attracted to them and who succeeds and who fails in those organisations.

    He did studies classifying people into the three groups and then measuring outcomes. In aggregate more people are matchers than either givers or takers. So his basic questions were:

    What sort of structures are optimal for team and individual performance? Who succeeds and why?

    Organisational norms and culture can influence the types of team work that develops. Some organisations are highly competitive and will attract takers, others highly collaborative and attract more givers.

    What happens when an organisation tries to change its culture. Highly competitive teams with lots of Takers that try to be more collaborative often end up with a “cut throat collaboration”: This operates as “I will pretend to help you but I am really just waiting for an opportunity to stab you in the back when I can get ahead”.

    If you start off collaborative and then move more competitive you often get friendly competition, “I am going to try to be more competitive with you but I am really hoping you push me to raise my game and afterwards we go out for drinks and the loser buys the winner drinks”

    Culture comes from what you incentivise and reward. A strong individual compensation focus tends to drives takers, versus collective compensation that tends to drive givers. An organisation full of takers is not going to attract givers.

    You don’t want to influence takers to become better fakers by just telling them what you measure: they will then just focus on achieving that. So be careful of being too explicit in your objective setting. If the culture is not strong and carefully managed, you can end up in a culture where the most visibile takers/fakers are the only ones who are successful. Ie you reward those able to manipulate the system.

    Instead focusing on the incentives, focus on taking away the disincentives to be Givers in an organisation. Demonstrate that you value their behaviour. For example “to make partner here you have to be more selfish” is not sending the right signal.

    In many team work and service orientated jobs no one wants a taker on the team and organisations often find ways of weeding them out so the organisations tend to be heavier in Givers and Matchers.

    Darwin proposed a theory of Group Selection: “If you had a tribe where they were always ready to aid one another and sacrifice themselves for the common good, they would be victorious over most other tribes” and that would lead to the possibility of group selection in evolution. The theory was and is controversial but later evidence does seem to prove that under certain conditions there does seem to be evidence for this. A group of all takers is likely to often end up with suboptimal outcomes as individuals aim to maximise their own outcomes and not the groups.

    In an analysis of performance evaluation and promotion decisions across 51,000 appraisals across multiple organisations, they found that the amount of time you spend helping others is as critical to assessments of performance, as to how well you do your own actual tasks.

    Curiously Givers end up more often at the tails of the distribution either succeeding big or failing big in the business. Even after controlling for other factors this continues to be the case in his data. So for Givers what determines their success or failure?

    Their strategy determines this: if you are a Giver, then who you help, when you help and how you help determines your success.

    Over time people get feedback and reinforcement on the job. Some Givers get positive reinforcement and go on to succeed. others get negative feedback and reinforcement, feel they are taken advantage of and decide they need to change. The question is whether they change their style (i.e. become a Matcher) or change their strategy (who, how, and why they help).

    The danger for Givers is deciding to just to be reactive and help with whatever requests come their way instead of deciding carefully what sort of giving behaviour does the organisation actually need? Is their behaviour aligning with the organisation’s mission and teams objectives.

    Time management skills are critical for performance and productivity. Givers who are not thoughtful about how they spend their time can have terrible productivity. Being thoughtful on time management can also be clearly more helpful to others.

    An ideal team in Adams view, has a mixture of Givers and Matchers. Matchers tend to be generous because they are matching givers. But you need the Matchers to weed out Takers because givers can be to trusting and too generous to takers whereas matchers will be much harder on them. Matchers believe more in fairness and justice compared to compassion and generosity.

    TED talk with Adam Grant

    And this Knowledge Cast episode with Shane Parish

    Farnam Street interview with Adam Grant