artifical intelligence · Big data · Computer Science · Culture · Economics · Fiction · Film · Learning · Psychology

Ready Player One: a vision of the future

If you haven’t watched it, stop now, go and rent it, and watch Steven Spielberg’s “Ready Player One“ (RPO).

The movie is set in “the Stacks”, a high density city of container homes situated in Columbus Ohio in 2045. It is a world where everyone spends most of their time online in Virtual Reality world called the Oasis. It centres on a group of video gamers including our hero Parzival (Wade Owen Watts in the real world), who spend their time playing different computer games in this virtual world. The Oasis was created by a geeky tech programmer, James Halliday and has made his company, Gregarious Games, the world’s most valuable business.

It always surprises me how little known this film seems to be beyond the circles of science fiction fans. And yes, for science fiction fans it’s a great film. But I think it’s more than that: I think it is a prescient vision of what the real future may well look like. I am not talking about the storyline itself or the fairytale ending, but about the vision of how our future world might operate socially and economically.

I am going to describe how and why I think this film is such a prescient a picture of our online future.

I will structure this as 3 sections

1. Why is Ready Player One a likely vision of our social future?

2. The idea of online virtual economies, and some of my own speculations of how these might develop in future

3. The interaction between those online virtual economies and real world economies

1. The vision of a virtual social future

Let me state my hypothesis: that an online virtual world is going to be the future of the majority of our social interaction.

Already some of our children spend more time interacting with friends that they meet online, than they do with the friends from their own school.

Why? Because those friends they meet online have by definition the same interests: they are playing the same game. It’s unlikely you are going to find 5 people in your local neighborhood with the very specific interests you have, but online you can find your “tribe” of 50,000, amongst the millions of players out there all brought together by the phenomena of online social gaming.

For many it is easier to connect in the virtual world. In the words of James Haliday: “I created the Oasis because I never felt at home in the real world. I just didn’t know how to connect with the people there.”

Just like in the movie, the beauty of online is that your avatar can be whoever you want – you can choose how you want to portray yourself to the world. The ultimate version of “how you choose to identify” in an age of gender fluidity. You can choose to identify as a beautiful girl when in reality as H says, “‘she’ could be a 300 pound dude who lives in his moma’s basement in suburban Detroit. And her name is Chuck.”.

In this online world you will gladly pay real world dollars to buy a fashionable cloak or “skin”, and to get the upgrades and artefacts. Just like real world fashion, this is the price to be “in” with your tribe, to communicate who you are and provoke the envy of your peers.

In the words of Parzival, “People come to the Oasis for all the things they can do, but they stay because of all the things they can be”

Beyond the ability to self identify, why are virtual worlds so alluring? In psychology, the pinnacle of Maslow’s hierarchy of needs is “self actualisation”. This is what we most aspire to as humans. Online games offer an quick way to a superficial level of “self actualisation”: players learn new skills as they master a game; they create new art and architecture in Minecraft. They post a video of it that is admired by many on YouTube, and if it goes viral they get their 5 minutes of fame. These are things that give people a sense of value and contribution and potential aspiration. And anytime they get bored, there is always the option of starting on some new game.

The film depicts an evolution from today’s gaming, which we are already starting to see: it is not about a single game, it’s about a virtual online platform on which many games are hosted. These different games are available on the platform, perhaps created by different developers. Players can jump around between games in the same virtual environment.

It’s not just computer games that will be hosted in this virtual world. Think of the real world places that we go to socialise such as bars: would you members of the Curiosity Club fancy having our next meeting at the Moss Isley Bar on Tatooine, or the Distracted Globe in the Oasis?

It will also host real world events like concerts, and music festivals. Hopefully you had the chance to Have a look at the recent virtual music concert by US rapper Travis Scott, attended by 12.3 million people live, simultaneously on the Fortnite platform. Compare that to the largest physical concert ever, by Jean Michel Jare, in Moscow in 1997 with an estimated 3.5m live audience. Having watched the music show, you can now buy a Travis Scot “skin” for only 2500 V Bucks in game, real world price $25.

Beyond social interaction we are also likely to see many real world business services in these online worlds. Healthcare consultations, meeting your insurance broker or banker, may all be far more efficient than meeting face to face in the real world.

So the future of our social interaction it seems, will be predominantly virtual!

Which brings us to point 2, the economies within these virtual worlds

What is particularly interesting to me is that these games are creating online economies. These virtual gaming economies are already exhibit many, but not all, of the characteristics of a real world economy.

In RPO people are out to collect coins, and artefacts (clothes and weapons), which they can lose if something happens to their avatar in a game.

At the moment most games have some form of currency. Just like Fortnites VBucks. This virtual currency is typically earned through game play, or purchased with real world dollars in order to speed up game play and enjoyment.

Players can get paid for work they are prepared to do. In RPO, H is building an Iron Giant and repairs other peoples broken artefacts. He has skills that are valued and paid for in the virtual world.

Games like Minecraft already enable players to work with each other , and for each other, in virtual worlds. My son will often offer to help out some other player building an “iron golem farm” (don’t ask) on a Minecraft server, in exchange for some online compensation like “enchanted diamonds.”

In Online Minecraft servers, the prices of virtual commodities like “red stone”, “wheat” and “enchanted diamonds” fluctuate with supply and demand created by other players. You can execute sophisticated real world strategies to make “money” in these games. For example, my son has figured out, entirely on his own, time zone arbitrage: buying goods cheaply in the morning in Britain when there are fewer players and less demand, selling the same thing more expensively in the evening when the American players come online and demand increases. In real world financial markets, arbitrageurs routinely engage in these sorts of strategies across time zones.

And there are all the real world characteristics that come with this virtual commerce: both the good: creativity, deals, alliances, productivity, and altruism, and the bad: cheating, reneging on promises, and stealing.

So all of this already exists today. If you will permit me, here are some of my speculations of how these online economies might develop in future:

I anticipate we will start seeing forms of virtual currency being created that are interchangeable between games.

Just like in the real world perhaps different games on the same platform exchange different currencies, and there are exchange rates between the currencies of the different games. Exchange rates set not by the game developer but by the community of players based on supply and demand.

And more importantly there will also be two way exchange rates between real world and virtual currencies. Thats when it starts getting really interesting economically speaking: When you can quantify the value of an hour of virtual world work in real world dollars.

How do these virtual economies differ from real world economies?

One of the challenges in these virtual economies is that the game designer is god. They could at any point modify the rules of the game, and reset everything. That could be unfair both for players and for any businesses that develop in the ecosystem around the game. I anticipate that in time there will need to be governance systems developed for these online virtual worlds in order to keep users and virtual businesses engaged, invested and protected.

Successful real world economies are built on a sense of “trust” in the governance of the economic system. How can this be created in these virtual worlds? More sophisticated games in future will no doubt allow the formation of virtual legal contracts between players, or between players and virtual businesses (including the games creators), for the delivery of virtual goods or services.

Block chain technology (the technology behind cryptocurrency like BitCoin) could be part of the answer. This technology could be used to guarantee ownership, to manage currency creation and secure other other forms of contracts in these virtual worlds. This might form the equivalent of “rule of law” in an online economy, creating the necessary framework and stability for a flourishing of these economies.

Might we see virtual independent central banks that have power over the supply of virtual currency to these worlds? There will quite possibly be a virtual world reserve currency… perhaps that will be Bitcoin?

3. Finally what about the real world Economic implications of these virtual economies?

Economically speaking, in the real world the biggest beneficiary of course will be the owner of the platform.

The gaming platform can create new virtual goods at zero marginal cost, target demand and charge real world money for your latest invisibility cloak or light sabre. All of this supported by AI algorithms that are designed to exactly optimize these experiences based on realtime feedback from millions of users, for that perfect dopamine hit; to keep us predictable human beings coming back for more and more and more…

We are already starting to see the idea of gaming platforms hosting multiple games with the likes of TenCent providing a gaming platform for developers and companies like Epic Gaming, the creators of Fortnite talking about making it into an online platform that hosts different games.

The power of social network platforms is the size of the social network. Network economics are exponential. The more people using one network, the more people are drawn to using that network, the more powerful it becomes. As they say in RPO ”Except for eating, sleeping and bathroom brakes, what ever people want to do, they do it in the Oasis. And since everyone is here, this is where we meet each other, this is where we make friends”.

So it’s very natural that there will be only a handful of dominant companies like james Haliday’s aptly named Gregarious Gaming, and Innovaitive Online Industries, their rivals.

Just as Facebook, Google, Alibaba and TenCent are dominant in today’s world because they have the network effect and they own the data. It’s not the AI algorithms that are valuable, it’s owning the data of the network on which they operate.

I am a bit of a pessimist when it comes to future real world employment. I think AI automation is going to replace a lot of menial jobs, and a whole lot of not so menial jobs. We will need coders, data scientists and medical scientists and so forth, but they are not going to be needed in such volumes as to replace the jobs lost in the real world. Even tasks like computer programming are going to become far more automated.

There will be many new jobs created in these online worlds and a new generation will find their job opportunities in these virtual worlds. Just as today Search Engine Optimisation has become a career option, virtual world optimisation will likely be a career choice in the future. No doubt many new online businesses will be created in these virtual worlds, making their creators wealthy.

The challenge is going to be the exchange rate between the real world and these virtual worlds. It’s very unlikely, in my opinion, that an hour of work in a virtual world is going to provide anything like minimum wage in the real world.

These platforms are built around classic network effects. A handful of gamers, or artists, gather the largest followings and are our future celebrities. They live in symbiosis with the platform. They get huge publicity, and their real world wealth builds as they get more followers, endorsements and marketing power. Just as in today’s social networks, the wealth is distributed across a very steep exponential pyramid, with very few at the top getting fabulously wealthy, a few more behind that making a decent living and a multitude beyond that being hopeful but earning only a pittance.

Given the diversity of special interests across the globe, there is plenty of opportunity for smaller chieftains to emerge, people who become the leaders of special interest groups because of their passion and their ability to sell themselves online as an expert or influencer to the 50,000 people interested in “that one thing”. But in every tribe the structure is the same, a few at the top of the exponential pyramid reaping relatively large rewards compared to a large base of fans who put in more than they get out.

To illustrate: my younger son explained his calculations to me this week: Mumbo Jumbo, his favourite Minecrafter, gets about 1.5 million views per video, he posts two videos a week, and therefore earns, from YouTube, between £2000 and £4000 per week. This all seems to be common knowledge for today’s 11 year olds. “So you can make a lot of money being a YouTuber”. My reply to him was, “yes you can, and you and approximately 1.5million other kids watch and want to be Mumbo Jumbo twice a week. That’s a lot of competition for that top spot…”

So as in RPO, in the real world we might end up living in a distopian world, with very large swathes of the population scraping together what they can in the real world from very low paying virtual world jobs. Their aspiration may we’ll be to afford just enough to buy that new VR headset or suit that allows them to experience their next virtual vacation.

In this virtual world we will see all the same tendencies and deviancies we see in the real world, but amplified in this online world.

Those with compulsive gambling tendencies are sure to be easy targets for AI algorithms, as demonstrated by Rick, Aunt Alice’s loser boyfriend who bets all their home deposit savings on upgrades for a game he was sure to win if he just had the right pair of gloves. People are likely to be met with scammers and charlatans. Policing, fairness and justice will all be big challenges.

Here I hope that RPO is not a prescient vision of the future. In the movie many people work for IOI in “loyalty centres”. They are forced to work to repay loans advanced by IOI to them. IOI also make money in the movie by selling Virtual Reality hardware (haptic suits, gloves, omni-directional treadmills) to people in the real world; but as our evil arch nemesis Nolan Sorento says in the movie “debt services dwarfs hardware”. And of course they make their money like our tech giants do, “selling up to 80 percent of a players visual field [to advertising] before inducing seizures”.

One of the things I am very concerned about is the burden of debt in this future world. In a world where real world income is shrinking, debt will be the killer.

In the movie it is Art3mis’s dad who, having borrowed gear, built up debt, got sick and could not afford to pay off his debt. He died in an IOI loyalty centre trying to work off those debts. Then IOI purchase and consolidate all of Art3mis’s (Samantha’s) debt and remand her to an IOI loyalty centre until her debts are paid off.

Just as in RPO, many individuals in the real world will likely have substantial debt burdens, from student loans, credit cards, medical bills and possibly, in game obligations. Add to that governments that are currently as heavily indebted as at any point in history, made even worse by the recent COVID19 crisis, will need taxes to pay that off. All of that Real world debt needs to be paid for with real world income.

Already as society we are starting to see a questioning of whether the tech behemoths are contributing to society fairly for the profit they extract. It’s likely that tax changes will occur to ensure that both these companies and the wealthy few who benefit from them pay a substantial portion of the tax burden. Solutions will have to be found to tax where revenue is generated in these global ecosystems.

Another possible development is the idea of a Universal Basic Income: a social safety net whereby everyone receives a certain minimum income from the state, presumably afforded by taxing the tech companies. Andrew Yang, one of this years early Democratic presidential candidates in the US, championed the idea of UBI as an antidote to automation lead job loss.

On a bleak note, I am afraid I don’t expect to see RPOs fairy tail ending. In particular I think it’s relatively unlikely that we will end up with a benevolent “High five” set of idealistic gamers in charge of the greatest profit generating business in the world. And I don’t anticipate that they will close it on Tuesdays and Thursdays. We are going to have to find the will power within ourselves to tear ourselves away from the virtual world.

So in summary, my speculations are

1. In future the majority of our work and social interactions will happen in online virtual worlds

2. Those virtual worlds will have virtual economies and there will be exchange rates between the virtual world currencies and real world currencies. They may have to develop forms of governance and virtual legal contracts to enable those virtual economies to flourish.

3. Because of automation and the pyramid nature of the online world we might see even more inequality in society with large swathes of the population enjoying themselves in the virtual world but scraping together a minimal income in the real world. How will society adapt to these challenges?

Is it all doom and gloom?

The luddites beleived technology would destroy jobs and they were wrong. The Prometheus myth has always instilled the fear that steeling fire (inventing new tech) will draw the wrath of the gods destroying human-kind but it’s never been the case. On that basis these fears may be overblown, perhaps we just don’t have the imagination to know how we will adapt to this new world.

All is not lost: In the words of James Haliday at the end of the movie: As terrifying and painful as reality can be, it’s also the only place that you can get a decent meal.

And that’s not about to change any time soon.

Because like James Haliday said, “Reality is the only thing that’s real.”

artifical intelligence · Business · General · Learning · Philosophy · Psychology · Science

Books of 2018

As I don’t have time to do full write-ups on everything I get through, here is just a brief few comments on the books I chose to read in 2018 and the key things I want to remember of them. Roughly in the order I would recommend them for general consumption…

  • 1. Man’s search for meaning by Victor Frankl
  • (See the separate blogpost on this) This is the book I would most recommend you read, it addresses very deep and meaningful challenges we all face, particularly suffering. It’s a short and easy read, but very powerful.
  • 2. Poor Charlie’s Almanac, Charlie Munger

    An amazing read, in echoes of Benjamin Franklin’s Poor Richards’s Almanac, full of down to earth wisdom and common sense, not to mention that this should be compulsory reading for anyone in the investment field.

    The single biggest concept is the idea of being well acquainted with the core mental models used in a wide variety of disciplines, and then be able to apply those in other situations in a methodical way. This is perhaps the best articulation of the multidisciplinary approach to which I aspire.

    The incredible moments for me are his insights into psychology. Many of these are now better understood with progress in modern behavioural economics, but Charlie Munger was years ahead in figuring out a lot of this for himself. He also makes some astute observations about the current state of psychology which, relative to many other sciences, seems in its infancy.

    3. The biography of Benjamin Franklin: an American Life by Walter Isaacson

    I had no idea just how prolific a thinker, scientist and statesman/politician Benjamin Franklin was. This book gives a real sense of that. Standout thoughts for me:

    • He was in many senses the ultimate pragmatist, choosing what was useful over ideology over and over again
    • His basic industriousness and strong drive towards practical daily work
    • His own awareness of his fallibility, while striving towards this industrious ideal
    • His role as a scientist and his curiosity about the natural world, including much around an understanding of electricity, inventing descriptions such as battery, positive, negative, charge etc.
    • His role as a printer, the power of the media in influencing society’s direction and thoughts
    • His passionate forming of societies to further all sorts of ends, and his ability to network
    • The interplay between aiming to find a diplomatic solution versus knowing when to take a stand. The role he played in the founding of America and its independence from Britain was quite incredible – from diplomacy to the leading of militias. And while this happened over much of his life, he achieved the majority in his last 10 years from the age of 65 to around 75.
    • He was instrumental in writing of, and was the only common signatory to the Declaration of Independence, the peace treaty with Britain (and with France) and the US Constitution. He was instrumental in forming a governance system that would bring the various independent states, into one United States, and in creating the two chamber structure of the Senate and the House.
    • The contrast between his pragmatic beliefs in “salvation by works” and a frankly not very deep religious conviction, versus Jonathan Edwards’ thinking, a leading Christian spiritual thinker of the timewho emphasised salvation by grace and grace alone, which I find spiritually curious.
  • Takeaways for myself: to be more industrious, pragmatic, and turn to action when needed, to be more outgoing in fostering connection (which is possible in a very different way in today’s internet-centric world) to continue to be curious, broad ranging and diplomatic.
  • It’s a fairly easy read, quite long and a bit repetitive at times but definitely worth pushing through. The second half of the book, which concentrates on the last 10 years of his life and many of the political developments between the US and Europe, is very interesting.
  • 4. Consilience by Edward O. Wilson

    His key concept is the unification and “consilience” of all fields of knowledge, the natural sciences, social sciences, art, spirituality and religion, with a scientific underpinning. The book was helpful to me in several ways:

    • In furthering this idea that what are traditionally thought of as separate fields of enquiry, are in fact highly related; and understanding one, may lead to deeper understanding of another.
    • Along side this, is the observation that most people become specialists in one area and few are the generalists making connections across what are considered separate areas of expertise. There is great opportunity for those willing to span the fields.
    • The idea of deeply rooted genetic origins to some of our cultural- and spiritual practices, and that our minds grow in a cultural context as part of a communal mind.
    • He was quite prescient in his insight that it would be the development of our understanding of the mind, that would become a connecting force across many of these areas.
    • The idea of social- or collective-Darwinism, the importance of culture in creating cohesion, that group cultures can evolve and individuals may subserve their needs to the group in order to ensure its survival.
    • This then leads to discussions of the social sciences from evolutionary biology to economics to psychology and hence onto art, ethics and religion.
    • While many may disagree, I found he had a positive light on spirituality and religion in the sense that, it is necessary for the effective organisation of our cultures
    • He is again prescient in looking forward at issues like gene therapy and environmentalism

    This is an intellectually exhausting read, with many concepts tightly packed and demanding language, so I would recommend it if you are interested in the idea of reconciliation as the basis for all forms of human knowledge; but be prepared to put the effort in.

    5. Deep Work by Cal Newport

    An easy read and some good practical advice too which I will be applying in the coming year to try and improve my productivity and general focus. (I have put out a separate post summarising my takeaways on this book.)

    6. The Four Tendencies by Gretchen Rubin

    This book has been hugely helpful in understanding our family’s internal motivations and drivers. The world can be split into two types of people: those who believe in personality types and those who don’t! Jokes aside, personality types can be useful mental models. Rubin develops a mental model of what motivates people: are we driven by what others expect of us, or are we driven internally by our own expectations, do we balance other people’s and our own expectations or do we reject all expectations – those arising from within and those of other people? Which of these types is dominant, has a great deal to say about how we approach life, and what approach in work or relationships will be effective in motivating in specific situations.

    In our experience her mental model was highly descriptive of the different members of our family. Each of the four different ‘types’ she describes is a good fit to one of the four of us. It’s been very helpful in understanding what approach to take in working with one another. Recommended for anyone in a relationship or parenting, struggling to make things work better.

  • 7. Life and Work Principles by Ray Dalio
  • I am a huge admirer of what Dalio has achieved at Bridgewater having followed their investment thinking for many years. He is possibly one of the most systematic of thinkers and this book of his Principles does exactly that, starting from elementary components and building up. The book also gives a good insight into him as a person and family man which round out a view, if you know him only as an investor.
  • There is too much to distil into one summary but a few of the key highlights and takeaways for me include:

    Life principles

    • What I have seen is that the happiest people discover their own nature and match their life to it.
    • Two worthy life goals: meaningful work and meaningful relationships
    • Embrace reality, see it as it truly is, and deal with it
    • Love your mistakes and learn from them. pain plus reflection = progress
    • Weigh second- and third-order consequences when making decisions
    • Have good mental maps (to help you understand the world), humility and open mindedness (to know you don’t have all the answers and be open to other’s solutions)
    • Understand your own ego barrier, preventing you from understanding or accepting your weaknesses and blind spots, versus your executive function, a higher level ‘you’ that wants to make the right decision – these are in conflict.
    • A concept of believability: weighted decision making I think is very powerful – weight the opinions of those with proven track records and who are most expert. This is a better model than either consensus decision making or dictatorial decision making. One of the most important decisions you can make is who you ask the questions of.
    • Other people genuinely see the world very differently from the way you do. Sincerely believe that you might not know the best possible path. You must suspend judgement and empathise to properly evaluate another person’s perspective.
    • Decision making is a two step process. Take in all the relevant information, then decide.
    • Thoughtful disagreement is an art: how to be both open minded and assertive.
    • Everything looks bigger closer up, and ‘new’ is overvalued relative to ‘great’.
    • Navigate levels effectively, high, intermediate, detailed. Synthesis requires back to the big picture, not getting lost in the detail. Simplify. It takes a genius to make it simple.

    Work principles (a few of the many he suggests)

    • Organisations consist of people and culture
    • An idea meritocracy = radical truth + radical transparency + believability weighted decision making
    • You have to be able to put your honest thoughts on the table, have thoughtful disagreement and abide by agreed-upon ways of getting past disagreement
    • Be loyal to the common mission, not to anyone who is not operating consistently with it
    • Create a culture where it is okay to make mistakes but unacceptable not to learn from them
    • Get in sync
    • Don’t leave important conflicts unresolved
    • Once a decision is made everyone should get behind it, even if individuals still disagree
    • Who is more important than what, hire right: for values, then abilities (ways of thinking and behaving), then skills (learnt tools), pay attention to track record
    • Don’t tolerate problems
    • Diagnose problems and get to their root cause
    • Evolve the machine
    • Have good governance

    My suggestion for using this book in a business context (after you have understood the big principles and concepts) is, if you have a specific set of challenges you’re facing there will probably be a section of his book that applies to that. See if applying them in your situation would be helpful. There is way too much to hold it all in mind, at once.

  • 8. 21 lessons for the 21st century by Yuval Noah Harari
  • I have wanted to read this author for some time (his book, Sapiens in particular). This one touches on most of the major themes that I think will be hugely important trends over coming years. In some ways it is a short cut covering many of the topics in both Edward Luce’s Demise of Western Populism and Kasparov’s Deep Thinking, including
    • Politics and the rise of populism
      The rise and impact of Artificial Intelligence
      Issues around education, truth and fake news, power
      The development of secular spiritualism
      The workings of the mind and our understanding of it
  • One key perspective that he brought through for me was the power and centrality of the narratives we tell ourselves about ourselves and our tribes, that this is both a defining feature of humanities success and our own greatest chains and shackles.
  • (With all it covered and some great quotes, there is a separate blogpost on it.)
  • 9. Deep Thinking by Gary Kasparov
  • I put out a separate post on this book too picking up on the themes of Artificial Intelligence and its increasing impact on work and the world, and on decision making psychology. A relatively accessible read with a bonus for anyone interested in the chess itself.

    10. The retreat of Western Liberalism by Edward Luce

    (Again, one I have done a separate blogpost on.) Articulate, and well-written, this is an excellent read for anyone wanting to understand the changing political landscape and rise of populism.

    11. The Psychology Book (published by DK)

    Psychology and the way our brains work has been an increasing area of interest for me both professionally and personally. I believe that psychology and the mind is going to be greatest and most important frontier on which we will make progress over the coming decades. I see its relevance everywhere: in interpersonal relationships between adults, both personal and professional; with children, as parents; in the aged; in the rise of interest in meditation and self help, in the rise of mental health issues amongst friends, colleagues and our community, and in my own self. I think mental health will become bigger than physical ailments as the frontier to address of human suffering. And compared to many of the other sciences it is its infancy, only just emerging from the dark ages. The subject it is studying is the most complex machine ever devised, the human brain. And studying cognition as opposed to the physical brain, is one of the most difficult things to do scientifically because most of it is happening in our heads, which to date are not terribly transparent to scientific inquiry.

    However as one approaches this subject it’s inevitably starts off as very confusing, with lots of different terminology and theories, and everyone appears to think that their theory is the perfect one to address your current situation. In the words of Charlie Munger, “to the man with a hammer, every problem looks like a nail”. In an attempt to try to make some sense of the cacophony of theories and approaches I am trying to get a more global picture of the field of psychology, this book by DK has been immensely helpful. It summarises the key ideas that each major psychologist contributed to the field and its helping me create a mental map of the different approaches and lineages we know of to date.

    12. Cryptonomicon by Neal Stephenson

    This was my fiction read of the year, a wonderful yarn combining the modern history of cryptography from World War Two through to today (slightly before the advent of crypto currency). It’s a bit long and some descriptions of less relevant facts can go on for a while but it’s a good nerd’s adventure, and he certainly knows his facts when it comes to cryptography.

    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.
    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

    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.

    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

    Business · Investment · Psychology

    Human behavioural motivations and insights with Rory Sutherland

    Here is a facinating conversation between Shane Parish of Farnam Street and Rory Sutherland, the Vice Chairman of Ogilvy & Mather Group, one of the largest advertising companies in the world.

    Rory started the behavioral insights team at OM and spends his days applying behavioral economics and evolutionary psychology to solve problems for their clients.

    The conversation is broad ranging and long (Rory certainly likes the sound of his own voice) but it is littered with hundreds of nuggets of mental models and insights that are applicable to both running a business, investing and understanding trends in the world today including political trends and technological trends like Artificial Intelligence. So well worth a listen.

    A few of my takeaways (my own thoughts in italics)

    “The problem with (traditional) economics isn’t only that it’s wrong, it’s that it is very creatively limiting, it posits a very one dimensional view of human nature, entirely driven by monetary utility.”

    Different consumers respond differently to different distribution channels

    Did you know that advertisers have exploited double-blind testing of what works in adverts since the 1800’s, often running different printing presses with different variants of adverts to test which were more successful! The medical world only caught onto this is the mid 1900’s.

    In an example he gives an advert in the pre internet era is run in three different forms: an option of responding by mail only, an option responding by telephone only, or an option where both channels were available. In their example the first mail option had a 2.5% response rate, the telephone advert had a 3.5% response rate. The interesting thing is that the combined option had a response rate of around 5.8%, ie. the two different channels for the same thing accessed almost completely different non overlapping groups of consumers. So how you sell something is as important as what you sell.

    The value of unpredictability, emotion and irrationality

    “It’s impossible for anything completely rational to successfully evolve, because a byproduct of being optimally rational is being completely predictable and if you were completely predictable you would be dead.” In evolutionary terms other aninals would take advantage of you due to your predictability. So there is a danger in looking at everything as an optimisation problem. Our psychology has evolved to be a bit random and unpredictable.

    Examples:

    People will take advantage of driverless cars because they are programmed to be safe, pedestrians will walk in front of them or mess around with them to have some fun. Driverless cars will not only have to cope with the normal unpredictability of human drivers but with also how humans will evolve their driving because of how they know driverless cars will behave!

    Anger is a useful emotion for humans because the potential to provoke it prevents someone from taking advantage you. They know at some point they will get a reaction and that basically keeps most of us well behaved.

    A connected though from me is: Will general artificial intelligence have to develop the same evolutionary mechanisms to operate in our world or survive in a world with other GAIs? Like genetic algorithms will it have to have random mutations or like humans have to evolve emotion to create unpredictability to be able to survive and evolve? What are the implications of that?

    Some societies have a cultural tilt towards being tolerant of ambiguity, and have more of an attitude to “give the benefit of the doubt” to someone else compared to those who are more rules driven “this is my right so I will assume I can do this and not make for any allowance for others” – the former (Sweden, Ireland, Netherlands) have lower road accident rates than the latter (Germany, the US). People who are less reliant on rules operate more carefully to avoid costly mistakes.

    Contextual biases and value signalling

    He explores how the value we place on either a good or service is incredibly contextual. For example we will have a bias towards paying more for the same service or good from one provider or another depending on our sense of the brand of the provider. eg we will pay more for a beer from a boutique hotel than for the same beer sold by a pop-up stand even if we take away all of the “other benefits” like the location and atmosphere. In a financial context think of this as a “boutique hedge fund” versus a lowley long only manager with the same alpha! How does this effect how you market your business?

    Other insights into human behaviour from Robert Trivers: his work on Reciprocal altruism (another behavioral trait, that we feel obliged to reciprocate towards someone who is altruistic to us) and work on self deception: Self deception is evolutionarily advantageous, as the best way to deceive others is to believe your own deceits.

    Our desire for artificial certainty justified by rational models

    Beauracrats, business men (and many investors) love a formula because of the artificial sense of certainty that it creates for then when making a decision. That prevents them from having to exercise judgement for which they might be blamed. Avoidance of blame is a key driver in many businesses.

    And that creates herding behaviours because of the asymmetry of reward to getting something right (often a small bonus) versus consequence of getting something wrong (getting fired). The “rational boring norm” is the safe place for most businesses and most peopke working for a big business. Most businesses and people are focused on avoiding bad outcomes rather than maximising the opportunity.

    This creates bogus rationality where we try to use simple, understandable algorithns to prove that the decision was logical rather than take a risk of complex judgement demanded in understanding a more complex system: like the financial markets. Does this have potential consequences for the current trend towards “smart beta” algorithms in investing?

    This leads on to the role of imagination vs reasoning in decision making. It usually takes takes imagination to formulate an insight or hypothesis and then logic to prove whether it is true. The role of imagination is often downplayed because afterwards we present the thinking as if the linear sequence of the logic led us to the conclusion. Science and insights are very seldom arrived the linear way.

    He highlights three different forms of reasoning

    Forward reasoning: what will happen next because I know of what has happened so far, based on our heuristics of how the world works. We then can test out model or heuristic by seeing if the outcome matched our expectation. If not we need imagination to hypothesise how to change our models or heuristics.

    Reverse reasoning: like a detective, I observe an outcome and then I hypothesise what preconditions could lead to it and like a detective I sift through possibilities. This requires a lot of imagination to hypothesise what could lead to the outcome.

    Post-rational reasoning: what we usually do when we come to a conclusion: our emotional limbic system reacts very quickly resulting in a conclusion or action using its heuristic systems in a situation, afterwards we justify the outcome by coming up with a narrative or logic that justifies the decision (fitting the facts to what we want the answer to be). We are post-rational creatures rather than rational creatures. Most of our reasoning happens after we feel an emotion, to justify why we feel the emotion.

    The psychology of choices and value.

    On a menu we can use the price of different items to signal worth or quality. The menu context pushes people towards selecting certain options, for example seldom choosing the most expensive or cheapest option on the menu, or the more expensive options being indicative of higher quality.

    Game theory and the difference between one-off games vs repeat games.

    In a repeat game you don’t just optimise your outcome for the next move but for many moves into the future. For example in selling to someone, you don’t just want this sale but future sales to the same customer, so you had better make sure that this experience is a good one for the customer even if that does not maximise your short term profit. In long term games you have to be tustworthy and reputation is incredibly important. Consumers make many choices based on their intuitive understanding of service providers trustworthiness and alignment. The bigger the upfront cost of committing to a decision that takes a long time to see results the more the long term alignment will matter.

    There are many practical applications in every day business. For example the focus by many large businesses incentivised by stock market behaviour towards short term earnings results is a bias toward “one time games” to make themselves rich. Think of the contrast between hedge funds with annual performance fees, private equity with 5 or 7 year incentivisation and Amazon with a very long horizon strategy for growing the business through reinvestment.

    The value of experimentation.

    In business you don’t have to be right all the time, you can be experimental and see what works and what doesnt (provided the cost to testing is low). It is important to test some counterintuitive or imaginative ideas because as its much more valuable when they pay off as your competitors won’t or are unlikely to have tested them.

    In the case of the financial markets the payoff of a contrarian bet may be large as it is counter to expectations with little downside if the crowd is already pricing in the consensus scenario.

    So have a listen here

    https://www.farnamstreetblog.com/2017/06/rory-sutherland-podcast/