Notes on “Does Palantir See Too Much?”

Just this past weekend, I finally got around to finally finishing The Lord of The Rings.

I know, I know. Spare me.

Worse, I finished the movies, not the book, and I do not have the faintest idea about when I’ll get around to reading it, but that is a story for another day. (Heh.)

Today’s notes, coincidentally, are about Palantir, but the new age one, not the panopticon from Tolkein’s universe. The new Palantir is a firm started by Peter Thiel, and is the subject of a rather long (and very nice) profile of the firm and it’s Chief Executive Officer, Alex Karp.

First, what is Palantir Technologies? Here’s Wikipedia – note that I have combined sentences across different paragraphs in this excerpt:

Palantir Technologies is a public American software company that specializes in big data analytics. Headquartered in Denver, Colorado, it was founded by Peter Thiel, Nathan Gettings, Joe Lonsdale, Stephen Cohen, and Alex Karp.

The company is known for three projects in particular: Palantir Gotham, Palantir Metropolis and Palantir Foundry. Palantir Gotham is used by counter-terrorism analysts at offices in the United States Intelligence Community (USIC) and United States Department of Defense…

…Palantir Metropolis is used by hedge funds, banks, and financial services firms…

…Palantir Foundry is used by corporate clients such as Morgan Stanley, Merck KGaA, Airbus, and Fiat Chrysler Automobiles NV

https://en.wikipedia.org/wiki/Palantir_Technologies

… and here’s the NYT amgazine story:

Its two primary software programs, Gotham and Foundry, gather and process vast quantities of data in order to identify connections, patterns and trends that might elude human analysts. The stated goal of all this “data integration” is to help organizations make better decisions, and many of Palantir’s customers consider its technology to be transformative.

https://www.nytimes.com/interactive/2020/10/21/magazine/palantir-alex-karp.html

But the story gets more interesting in the very next line in the article…

Karp claims a loftier ambition, however. “We built our company to support the West,” he says. To that end, Palantir says it does not do business in countries that it considers adversarial to the U.S. and its allies, namely China and Russia. In the company’s early days, Palantir employees, invoking Tolkien, described their mission as “saving the shire.”

https://www.nytimes.com/interactive/2020/10/21/magazine/palantir-alex-karp.html

There’s two questions at play here, really. First, what does Palantir Technologies do (that’s the first excerpt from the NYT story)? And second, why does it do what it does (and that’s the excerpt right above)?

Now, the reason I find this so interesting is that the instinctive argument that you might want to make against Palantir Technologies is “but privacy!”. And the second excerpt above is, in a sense, Palantir’s response.

Although Palantir claims it does not store or sell client data and has incorporated into its software what it insists are robust privacy controls, those who worry about the sanctity of personal information see Palantir as a particularly malignant avatar of the Big Data revolution. Karp himself doesn’t deny the risk. “Every technology is dangerous,” he says, “including ours.”

https://www.nytimes.com/interactive/2020/10/21/magazine/palantir-alex-karp.html

Technology is technology – what you do with it is what matters is a rather old argument, but that’s the argument that is being used here. There’s more though – if we don’t, somebody else will. Better the known devil, etc.

Once the data has been integrated, it can be presented in the form of tables, graphs, timelines, heat maps, artificial-intelligence models, histograms, spider diagrams and geospatial analysis. It is a digital panopticon, and having sat through several Palantir demos, I can report that the interface is impressive — the search results are strikingly elegant and easy to understand.

https://www.nytimes.com/interactive/2020/10/21/magazine/palantir-alex-karp.html

Elsewhere in the article, the author speaks about how the work isn’t glamorous, and is really just glorified plumbing. Well, maybe – but as anybody who has lived in a house will tell you, it is plenty important. Good plumbing is plumbing you don’t notice, but reap the benefits of – and that seems to be Palantir’s USP.

While Thiel provided most of the early money, the start-up secured an estimated $2 million from In-Q-Tel, a venture-capital firm that finances the development of technologies that can help the C.I.A.
Karp says the real value of the In-Q-Tel investment was that it gave Palantir access to the C.I.A. analysts who were its intended clients.

https://www.nytimes.com/interactive/2020/10/21/magazine/palantir-alex-karp.html

Did In-Q-Tel pay to help start Palantir, or did it hire consultants for 2 million dollars? Did Palantir agree to work for only 2 million dollars to get access to the CIA?

Bottom-line: the world is a non-zero sum game.

According to Thiel, their conversations generally took place late at night in the law-school dorm. “It sounds too self-aggrandizing, but I think we were both genuinely interested in ideas,” he says. “He was more the socialist, I was more the capitalist. He was always talking about Marxist theories of alienated labor and how this was true of all the people around us.”

https://www.nytimes.com/interactive/2020/10/21/magazine/palantir-alex-karp.html

This excerpt is from a section which is about Karp figuring out his education and career, and we learn about his Jewish, rebellious background as well. I found this clip interesting because from Peter Thiel’s viewpoint, succeeding in selling the idea behind Palantir to Karp is one of the biggest validations there could possibly be. If he bought into the story, well, there must be something to it. Second, what better way to maintain checks and balances than to have somebody like Karp running the show?

In fact, Thiel hiring Karp for this job becomes more and more interesting the more you learn about Karp. Thiel has a quote in the article about needing someone who was smart and scrappy, but left unsaid, perhaps, is someone who was very unlike Thiel. And not just unlike Thiel, also unlike the typical CEO. A person who worries about the alienation of labor, likes solitary pursuits, and dreams of being an intellectual in Europe isn’t the person you would have in mind as the typical CEO of a firm like Palantir. But that, it would seem, was the whole point. Well, that, and being a bachelor by choice wouldn’t hurt, given the traveling nature of the job.

(Although there is a section in the article in which Karp insists that he being who he is hasn’t helped him or Palantir.)

Karp and Thiel say they had two overarching ambitions for Palantir early on. The first was to make software that could help keep the country safe from terrorism. The second was to prove that there was a technological solution to the challenge of balancing public safety and civil liberties — a “Hegelian” aspiration, as Karp puts it.

https://www.nytimes.com/interactive/2020/10/21/magazine/palantir-alex-karp.html

Karp and Thiel make for a Hegelian pair themselves!

When I asked Thiel about the risk of abuse with Palantir, he answered by referring to the company’s literary roots. “The Palantir device in the Tolkien books was a very ambiguous device in some ways,” he said. “There were a lot of people who looked into it and saw more than they should see, and things went badly wrong when they did.” But that didn’t mean the Palantir itself was flawed



He continued: “The plot action was driven by the Palantir being used for good, not for evil. This reflected Tolkien’s cosmology that something that was made by the good elves would ultimately be used for good.”



A moment later, he added: “That’s roughly how I see it, that it is ultimately good and still very dangerous. In some ways, I think that was reflected in the choice of the name.”

https://www.nytimes.com/interactive/2020/10/21/magazine/palantir-alex-karp.html

I found this fascinating, and I also found it useful to think about this from the Wikipedia article about the original Palantir:

A major theme of palantír usage is that while the stones show real objects or events, they are an unreliable guide to action, and it is often unclear whether events are past or future: what is not shown may be more important than what is selectively presented. Further, users with sufficient power can choose what to show and what to conceal

https://en.wikipedia.org/wiki/Palant%C3%ADr

The technology is what it is – and as Karp himself points out, it is susceptible to misuse. More importantly, the technology in combination with the person(s) who are using it is, at least potentially, an even more dangerous tool.

Karp made clear that he was opposed to Trump’s immigration policies: “There are lots of reasons I don’t support the president; this is actually also one of them.” He told me that he was “personally very OK with changing the demographics of our country” but that a secure border was something that progressives should embrace. “I’ve been a progressive my whole life,” he said. “My family’s progressive, and we were never in favor of open borders.” He said borders “ensure that wages increase. It’s a progressive position.” When the left refuses to seriously address border security and immigration, he said, the right inevitably wins. To the extent that Palantir was helping to preserve public order, it was “empirically keeping the West more center-left.”

https://www.nytimes.com/interactive/2020/10/21/magazine/palantir-alex-karp.html

To understand a big data firm started by one the world’s most successful VC’s, one should end up reading about a German philosopher from the 18th century – for what could possibly more Hegelian than that excerpt?

And finally, the last sentence in the article:

“Palantir,” he said, “is the convergence of software and difficult positions.”

https://www.nytimes.com/interactive/2020/10/21/magazine/palantir-alex-karp.html

That, it would seem, is a reasonably good way to understand Pater Thiel’s investment philosophy!

Read the whole NYT article yourself (at least twice, if you ask me).

Inflation: Oh ’tis problematic. Or is it?

A student messaged last week, asking some questions about inflation and its measurement in India. In particular, they wanted to know about food and its impact on inflation right now.

Well, outsourcing is always and everywhere a good idea, and Vivek Kaul had already answered the question at great length:

What this means is that, despite the end consumers of food paying a higher price, the farmers are largely not benefitting from this rise in food prices, given that they sell their produce at the wholesale level.
This difference can be because of a few reasons.

a) A collapse in supply chains has led to what is being sold at the wholesale level not reaching the consumers at the retail level, thus, leading to higher prices for the consumer.

b) This could also mean those running the supply chains hoarding stuff, in order to increase their profit.

Having said that, the former reason makes more sense given that stuff like vegetables, egg, fish and meat, etc., cannot really be hoarded. Also, hoarding stuff like pulses, needs a specialized storage environment which India largely lacks.

https://vivekkaul.com/2020/10/13/10-things-you-need-to-know-about-indias-high-inflation/

The entire article is worth reading (and so is subscribing to Vivek’s blog, so please do so!). And if you think 2020 isn’t depressing enough already, do read this article, also written by him. A short excerpt follows:

To conclude, the Indian economy will contract during the second half of the financial year. There is a slim chance of growth being flat for the period January to March 2021. Inflation, even though it might come down a little, is likely to remain high due to the spread of the covid pandemic. Hence, India will see conflation through 2020-21.

https://vivekkaul.com/2020/09/15/conflation-contraction-inflation-is-here-and-it-will-stay-this-year/

From a reading-the-tea-leaves perspective, it would seem the RBI actually isn’t that worried about inflation right now (and rightly so!). Here’s an excerpt from an excellent newsletter, Anticipating the Unanticipated that makes this point:

But the RBI wants to signal it is willing to live with inflation running above ‘comfortable’ level in the coming days. The MPC report last week claimed almost 80 per cent of the increase in inflation beyond the 4 per cent target can be attributed to supply chain disruptions and increase in fuel prices. This it believes is a short-term phenomenon and inflation will be in the 5 per cent range next year. This is underlined to give comfort to bond investors to buy government securities without the fear of a near-term interest rate hike to contain inflation. Further, the other step announced by RBI in extending the HTM (hold-to-maturity) limits by another year to March 2022 is to protect any bondholder from the volatility of prices and booking losses on account of it. The overall RBI signal is it doesn’t want the worry of rising inflation and a consequent rate increase to come in the way of growth. It’s focus now is on improving the transmission of rate cuts to the borrowers to stimulate growth.

https://publicpolicy.substack.com/p/77-the-inflation-conundrum-

… and here is Anantha Nageswaran making the same point, but by utilizing a different analysis:

This exercise generates the hypothesis that there is little or no intersection of the household inflation expectations formation and the monetary policy regime. Two, high inflation expectations peaked in September 2014. Similarly, the current high inflation expectations should peak as supply disruptions ease. So, in my view, RBI is betting correctly that the rate of inflation would ease and project policy on hold for the next few quarters. Three, inflation generation process should matter only to the extent that it affects medium-term output and employment generation. For now, other indicators suggest that it is not as disruptive as it was in 2011-13. Therefore, there is no need to turn it into a fetish. The new MPC and the central bank have done well and done good. They should be pleased.

https://thegoldstandardsite.wordpress.com/2020/10/14/the-inexplicable-16-inflation-rate/

And for the data nerds among you, here is the Inflation Expectations Survey of Households by the RBI (do keep in mind the point Ananta Nageswaran makes about trimmed means in his article). Note that currently at least, not too many people seem to be too worried about persistently high food inflation.

Side note: Jason Furman’s podcast with Tyler Cowen contained this interesting snippet:

FURMAN: GDP could be more meaningful if we measured it better. The inflation rate gets harder and harder to measure over time. So I think the one that probably has deteriorated in meaningfulness is the measure of inflation. Number one, we don’t measure it well, and number two, it’s low enough that it’s hard to get that excited about it.

COWEN: Is that a quality-of-goods problem? Or how we do chaining over time? Where are we going wrong in measuring inflation?

FURMAN: Just more and more of the economy is in areas that are harder to measure the quality of, healthcare being the most notorious.

https://medium.com/conversations-with-tyler/jason-furman-tyler-cowen-economics-b3e6d73dfd0f

I’ve said it before, and I’ll say it again: macro is hard.

Finally, here are past EFE articles on inflation.

Video for 25th October, 2020

I’m sure I must have linked to this before, and shame on me if I haven’t – but I did just finish teaching game theory in my principles of economics class at the Gokhale Institute – plus, who can resist watching this again, eh?

Tweets for 24th October, 2020

Links for Friday, 23rd Oct, 2020

Human evolution produced gossip. Cultural anthropology sees gossip as an informal way of enforcing group norms. It is effective in small groups. But gossip is not the search for truth. It is a search for approval by attacking the perceived flaws of others.

http://www.arnoldkling.com/blog/gossip-at-scale/

Arnold Kling writes an excellent essay about gossip and (as he puts it), the ISS. That, to be clear, stands for Internet, Smart Phones and Social Media. Excellent essay, well worth your time.

Low level of CRAR not only hampers bank health but also restricts smooth transmission of monetary policy. Injection of capital by the Government of India in public sector banks is likely to increase the credit flow to the real sector and help in smoother transmission of monetary policy.

https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/RBIWPS12.PDF

How much of this paper is signaling/laying the groundwork, and how much of it is a genuine addition to what we already know about monetary policy? The link comes via Amol Agarwal

This is exactly why I am so pleased to see how narrowly focused the Justice Department’s lawsuit is: instead of trying to argue that Google should not make search results better, the Justice Department is arguing that Google, given its inherent advantages as a monopoly, should have to win on the merits of its product, not the inevitably larger size of its revenue share agreements. In other words, Google can enjoy the natural fruits of being an Aggregator, it just can’t use artificial means — in this case contracts — to extend that inherent advantage.

https://stratechery.com/2020/united-states-v-google

The concluding paragraph from this blog post by Ben Thompson is even better, and I was tempted to go with it, but this works too! Please read the whole thing – excellent writing, as always.

If you’re looking to get an iPad right now and can afford it, the new $599 iPad Air is the best tablet for most people. Apple has taken the design from the more expensive iPad Pro and brought it down to a more reasonable price point. It’s $100 more than it was last year, but in return this year’s iPad Air has a bigger, better screen and a faster (and very intriguing) processor.

https://www.theverge.com/21525780/apple-ipad-air-2020-review

Dieter Bohn’s review of the iPad Air (2020). If I could, I would!

Miniature paintings are among the most beautiful, most technically-advanced and most sophisticated art forms in Indian culture. Though compact (about the same size as a small book), they typically tackle profound themes such as love, power and faith. Using technologies like machine learning, augmented reality and high-definition robotic cameras, Google Arts & Culture has partnered with the National Museum in New Delhi to showcase these special works of art in a magical new way.

https://blog.google/around-the-globe/google-asia/india-miniature-masterpieces

This is a must have app on your phone. I mean, it was always a must-have app on your phone, this latest collection only makes the argument stronger!

The Nobel Prize in Economics, 2020

It is such a pleasure to begin a blog post on such a happy, warm and fuzzy note in 2020 – and what’s rarer is that the note is courtesy Twitter!

Milgrom and Wilson aren’t exactly household names in India – or at any rate, weren’t household names until yesterday. In fact, even within economics departments, they are unlikely to have been names that absolutely everybody is familiar with. This blog post is as much a celebration of they having won the Nobel Prize for Economics as it is an opportunity for me to learn more about their work.

But let’s begin by allowing Twitter to return to type, as it were:

This is not, to be clear, any random person on Twitter. Branko Milanovic is currently a Professor at CUNY, has worked in the World Bank, and has written some rather well received books in the recent past.

So what gives? Why such a curmudgeonly response to the highest prize that one can receive as an economist?

Twitter being what it is, Branko Milanovic was eventually goaded into answering this question himself (link here), but his response – to me! – boils down to “Pah! There are other, more important problems to think about.”

Well, maybe. But if you ask me, Milgrom and Wilson’s work is plenty important in its own right.

Let’s find out why!

Every day, auctions distribute astronomical values between buyers and sellers. This year’s Laureates, Paul Milgrom and Robert Wilson, have improved auction theory and invented new auction formats, benefitting
sellers, buyers and taxpayers around the world.

https://www.nobelprize.org/uploads/2020/09/popular-economicsciencesprize2020.pdf

How do we decide who gets what? Should this be decided by governments without the use of markets, or should this be completely random? Should bidding wars (that is, auctions) be deployed, and if so, what might be the implications?

It is for their attempts at answering that last question, for the most part, that Milgrom and Wilson have been awarded this year’s Nobel Prize in Economics.

How did they go about answering this question? Here’s Timothy Taylor with one answer:

A useful starting point is to recognize that auctions can have a wide array of formats. Most people are used to the idea of an auction where an auctioneer presides over a room of people who call out bids, until no one is willing to call out a higher bid. But auctions don’t need to work in that way.

An “English auction” is one where the bids are ascending, until a highest bid is reached. A “Dutch auction”–which is commonly used to sell about 20 million fresh flowers per day–starts with a high bid and then declines, so that the first person to speak up wins. In an open-outcry auction, the bid are heard by everyone, but in a sealed-bid auction, the bids are private. Some auctions have only one round of bidding; others may eliminate some bidders after one round but proceed through multiple rounds. In “first-price” auctions, the winner pays what they bid; in “second-price” auctions, the winner instead pays whatever was bi by the runner up.

In some auctions the value of what is being bid on is mostly a “private value” to the bidders (the Nobel committee suggests thinking about bidding on dinner with a Nobel economist as an example, but you may prefer to substitute a celebrity of your choice), but in other cases, like bidding on an offshore oil lease, the value of the object is at least to some extent a “common value,” because any oil that is found will be sold at the global market price. In some auctions, the bidders may have detailed private information about what is being sold (say, in the case where a house is being sold but you are allowed to do your own inspection before bidding), while in other auctions the information about the object being auctioned may be mostly public.

In short, there is no single perfect auction. Instead, thinking about how auctions work means considering for any specific context how auction rules and format in that situation, given what determines the value of the auctioned objects and what what kind of information and uncertainty bidders might have.

https://conversableeconomist.blogspot.com/2020/10/a-nobel-prize-for-auction-theory-paul.html

Do read the rest of the blogpost for some very interesting examples of how auctions might go wrong – most of them excerpted from an excellent paper by Paul Klemperer.

The excellent, excellent blog A Fine Theorem ends up responding (unintentionally, to be clear) to Branko Milanovic while speaking about Milgrom and Wilson’s body of work:

When it comes to practical application, Milgrom’s work on auctions is well-known, and formed the basis of his Nobel citation. How did auctions become so “practical”? There is no question that the rise of applied auction theory, with the economist as designer, has its roots in the privatization wave of the 1990s that followed the end of the Cold War. Governments held valuable assets: water rights, resource tracts, spectrum that was proving important for new technologies like the cell phone. Who was to be given these assets, and at what price? Milgrom’s 1995 Churchill lectures formed the basis for a book, “Putting Auction Theory to Work”, which is now essential reading alongside Klemperer’s “Theory and Practice”, for theorists and practitioners alike. Where it is unique is in its focus on the practical details of running auctions.

https://afinetheorem.wordpress.com/2020/10/12/operations-research-and-the-rise-of-applied-game-theory-a-nobel-for-milgrom-and-wilson/

In other words, applied auction theory helps us, as a society, decide who gets what, and on what basis. Especially with the end of the Cold War, and with the wave of liberalization and privatization that followed in many major economies the world over, applied auction theory became especially important!

Timothy Taylor again:

One useful property of auctions is that in a number of settings they can discipline the public sector to make decisions based on economic values, rather than favoritism. For example, when a city wants to sign a contract with a company that will pick up the garbage from households, companies can submit bids–rather than having a city council choose the company run by someone’s favorite uncle. When the US government wants to give companies the right to drill in certain areas for offshore oil, or wishes to allocate radio spectrum for use by phone companies, it can auction off the rights rather than handing them out to whatever company has the best behind-the-scenes lobbyists. In many countries, auctions are used to privatize selling off a formerly government-owned company.

https://conversableeconomist.blogspot.com/2020/10/a-nobel-prize-for-auction-theory-paul.html

By the way, this post – or indeed the blog posts that I have referred to so far – aren’t really indicative of just how complex this field has become today! For example, take a look at this video to understand how modern auction design is the combination of cutting edge computer science, operations research and economic theory at the same time (h/t Alex Tabarrok on MR)

MR’s other blogger, Tyler Cowen’s posts on both winners are also worth reading: here is the post on Milgrom, and here is the post on Wilson. Like the post on A Fine Theorem, both posts contain much more information about both authors than just the body of work that won them the Nobel.

For example, the story of Milgrom courting his wife:

And before I forget, also read about the “no-trade” theorem and the bid-ask spread paper – not to mention the “Chain Store” paradox and the “Gang of Four” papers. Tyler Cowen’s post, and A Fine Theorem’s post have fine summaries of all of them.

In line with Tyler Cowen’s post about Milgrom, his post about Wilson contains much more information about Wilson’s work outside of auction theory. The entire post is worth bookmarking for the treasure trove of links contained therein, but in particular, the following are particularly interesting to me:

Dynamic Games with Incomplete Information, Wilson’s survey article on Electric Power Pricing, and a (mutual) interview between Alvin E. Roth and Wilson.

Speaking of Roth (himself a Nobel Prize winner, of course), here is his blogpost about the prize – as he says, 2024’s Nobel Prize is something we should keep an eye out for!

Joshua Gans, another student of Paul Milgrom, also has a blog post on the winners, with a rather neat explanation of why Milgrom’s Wikipedia page is so lengthy:

For that conference, the attendees all contributed to complete Paul’s wikipedia page. The idea was to make sure that everything was there specifically for today. I had a goal of making it the longest page of any living economist. We overshot and it is the longest page of any economist! His contributions were so voluminous, it wasn’t hard to get to that point.

https://digitopoly.org/2020/10/12/remarks-on-paul-milgrom/

There is so much to read as a consequence of having written this blogpost! Both for myself, and for anybody who might be interested, here is a (by no means comprehensive) list:

  1. Paul Milgrom’s Wikipedia page (Joshua Gans and team are nothing if not thorough!)
  2. Robert Wilson’s Wikipedia page.
  3. How Market Design Emerged from Game Theory: A Mutual Interview
  4. Economics, Organization and Management, by Milgrom and Roberts (a textbook)
  5. The Firm as an Incentive System, by Holmstrom and Milgrom
  6. Putting Auction Theory to Work, by Paul Milgrom
  7. The Nobel Prize popular science background
  8. …and the scientific background.
  9. What Really Matters in Auction Design (by Klemperer, note!)
  10. Trillion Dollar Economists, by Robert Litan (h/t Arnold Kling)
  11. And of course, everything else I have linked to already!

And finally, just to round off the whole thing, why not end with a tweet, since we started with one? Explaining stuff as simply as possible is one of my life goals, and I wish my game was half as good as this tweet:

Congratulations to both winners!

Previous Nobel Prize entries can be found here (2019: Banerjee, Duflo and Kremer) and here (2018: Romer and Nordhaus)

Five Articles I Enjoyed Reading This Week

The book is about how public sector failures have forced Indians to seek private solutions even if it means paying for those services that they are entitled to demand from their governments. In other words, private solutions, innovative though they may be, are the other side of the coin of public failures. That said, many of the non-accountability of the public sector is traced to the private sector criminality or apathy or both.

Whether it is letting pollutants into our rivers, whether it is defaulting on bank loans, whether it is diverting the loans taken for personal purposes, whether it is underbidding and then re-contracting for providing services or goods to the public sector or evading taxes, the private sector feeds into and reinforces public sector apathy. Trust breaks down at both ends. Accountability is weakened all around.

https://thegoldstandardsite.wordpress.com/2020/07/19/the-gated-republic-a-compellingly-uncomfortable-book/

I’m reading The Gated Republic myself right now, and like the author says in the review I have excerpted from above, I’m not enjoying reading the book. The reason I’m not enjoying reading it is the same: this is not a book you read for enjoyment. Which is all the more reason to read it!

Although Shetty often performed free surgeries for the poorest of the poor, he reasoned that the only way to sustainably serve large numbers of people in need was to make it a business. “What Mother Teresa did was not scalable,” he says—perhaps the first time venture capital jargon has been applied to the work of the Angel of Calcutta.

https://getpocket.com/explore/item/the-world-s-cheapest-hospital-has-to-get-even-cheaper

Via MR, a profile of Dr. Devi Shetty.

It’s very strange that economists and analysts keep talking of a V-shaped or a U-shaped economic recovery from the current crisis. It’s as if the English alphabet has only two letters. At best, some talk of a W-shaped recovery, while the really depressing ones sometimes mention the L-shape. But there are plenty of other letters, all of them neglected and ignored by the pundits.
This is rank discrimination—we need to start an ‘Other Alphabets Matter’ movement immediately.
We bring you here the complete guide to the recovery alphabet, incorporating all the letters.

https://www.moneycontrol.com/news/business/economy/other-alphabets-matter-a-complete-a-z-guide-to-the-economic-recovery-5575021.html

Perfect Friday material, this. G, R and T are my personal favorites. What about you?

Kelton does not explain why she believes that those currently without jobs would be a good match for her spending priorities. But without the ability to wave a magic wand to instantly transform the unemployed into teachers, skilled health care workers, and engineers specializing in energy alternatives, more spending in these areas would compete for scarce workers rather than soak up idle ones.

https://lawliberty.org/book-review/deficits-budgetary-and-conceptual/

Another review of Stephanie Kelton’s work. I remain unconvinced about MMT (to the extent that I understand it!)

The point then is not to force other countries to adopt the Chinese development model, or even evangelize the glories of the Chinese Party-state to foreign audiences, but rather to slowly weave a web of economic and institutional ties that link all countries to a Chinese center, a center which the Communist Party of China has control of. In such a world, few countries would want to risk their share of surging global economic growth by doing things the Party-state might object to (say, hosting Uyghur dissidents or protesting against mass camps in Xinjiang). Common development turns Chinese interests into global interests.

https://scholars-stage.blogspot.com/2020/06/the-world-that-china-wants-iii-taking.html?m=1

I’ll be writing more about this in the days to come, but this is an excellent essay about understanding China and her long term goals and ambitions.

A wish list for Google Classroom

Today’s essay isn’t for everybody – but if you are interested in tech/education, you may want to give it a read.

As the title suggests, it’s about the functionalities I would like to see in Google Classroom.

It’s available on Google Docs, and the link is here. Especially for folks working in the intersection of tech and education, please do share, and please do give me feedback. Much appreciated!

Also, a quick update – work’s been slightly crazy, so I’ll shift to an M/W/F posting schedule for a while.

The Everything Play

It was a throwaway line in a post from last week:

Oil, its linkages, its by-products, and its enabling nature is what attracted Dhirubhai to oil as a business. It wasn’t just about oil itself – it was always about all of what oil allowed one to get into as a business. And it is the same now – it’s not about telecommunications and data. That just enables Reliance to get into – well, everything, really.

https://econforeverybody.com/2020/07/23/really-understanding-jio/

…but it deserves deeper analysis.

Software has eaten up the world

We’ll begin by taking a look at what is by now a very old essay, but it remains an eminently readable one: Why Software Is Eating the World,
by Marc Andreessen.

Here’s an excellent excerpt:

More and more major businesses and industries are being run on software and delivered as online services — from movies to agriculture to national defense. Many of the winners are Silicon Valley-style entrepreneurial technology companies that are invading and overturning established industry structures. Over the next 10 years, I expect many more industries to be disrupted by software, with new world-beating Silicon Valley companies doing the disruption in more cases than not.

https://a16z.com/2011/08/20/why-software-is-eating-the-world/

Remember, this was written in the year 2011. We’re talking Indian winning the World Cup, Obama as the President of the United States of America, and the biggest threat to the global economy was the worry that 2008 would somehow erupt all over again. Or something like that.

And to help you understand quite what this means in practice, let’s talk, um, boogers. It’s bad enough that we’re talking about them, I agree. Imagine having to eat them, and imagine they were not even yours!

When two Domino’s Pizza employees filmed a prank in the restaurant’s kitchen, they decided to post it online. In a few days, thanks to the power of social media, they ended up with felony charges, more than a million disgusted viewers, and a major company facing a public relations crisis.
In videos posted on YouTube and elsewhere this week, a Domino’s employee in Conover, N.C., prepared sandwiches for delivery while putting cheese up his nose, nasal mucus on the sandwiches, and violating other health-code standards while a fellow employee provided narration.

https://www.nytimes.com/2009/04/16/business/media/16dominos.html

As you might imagine, things weren’t looking good for Dominos. So what did they do?

BILL TAYLOR: So this is the part of the Domino’s story that struck me more than anything, when he simply declared for all to hear, we no longer think of ourselves as a pizza company. We think of ourselves as a technology company. I said, excuse me? Well, turns out, they’re headquartered in Ann Arbor, Michigan. They’ve got 800 people working in headquarters. Fully 400 of those, half of their headquarters employees, are engaged in software analytics and big data. They really– once they finally got the product right, they really are, from this point going forward, as much a technology company as they are a food company. And many of the initiatives have to do with making it as easy, as convenient, as kind of natural and impulsive almost to order Domino’s, much more so than any other pizza company.
So it began very early on with the Domino’s smartphone app. They then went to the capacity to order a Domino’s over text messaging. Now you can literally tweet an emoji of a pepperoni pizza, and a pepperoni pizza will appear at your doorstep within 30 minutes. You can order it through Facebook messaging. They’re simply saying to themselves, we understand that a big piece of our customer base are young people, millennials, or what have you. And he knows where those people are and where they’re spending their time, and that capacity while you’re on Facebook to simply go over to Messenger and pop in an order or while you’re sitting there, you know, tweeting out various things to also tweet out a Domino’s emoji, because you’ve pre-registered, it’s really a very powerful thing.

https://www.delltechnologies.com/en-us/perspectives/podcasts-trailblazers-s01-e03-fast-food-delivery/

They decided to become a software company. Yes, that’s right, Dominos is not a pizza company that uses software, it is a software firm that happens to deliver pizzas.

Dominos is one of the best examples I can think of that helps you understand what Andressen was getting at when he said software is eating the world. It was literally eating up a pizza (company, that is)!

Amazon and Jeff Bezos

As you may have heard, Amazon and it’s owner are doing fairly well:

Jeff Bezos added $13 billion to his net worth on Monday, the largest single-day jump for an individual since the Bloomberg Billionaires Index was created in 2012.
Amazon.com Inc. shares surged 7.9%, the most since December 2018 on rising optimism about web shopping trends, and are now up 73% this year.

https://www.bloomberg.com/news/articles/2020-07-20/jeff-bezos-adds-record-13-billion-in-single-day-to-his-fortune

Why are they doing so well? Because the global pandemic has accelerated what was already a very obvious trend: online shopping is here to stay.

Perhaps the single most dramatic example of this phenomenon of software eating a traditional business is the suicide of Borders and corresponding rise of Amazon. In 2001, Borders agreed to hand over its online business to Amazon under the theory that online book sales were non-strategic and unimportant.
Oops.
Today, the world’s largest bookseller, Amazon, is a software company — its core capability is its amazing software engine for selling virtually everything online, no retail stores necessary. On top of that, while Borders was thrashing in the throes of impending bankruptcy, Amazon rearranged its web site to promote its Kindle digital books over physical books for the first time. Now even the books themselves are software.

https://a16z.com/2011/08/20/why-software-is-eating-the-world/

Like Dominos, Amazon is a software company that happens to sell books, and just about everything else you can imagine. The stock market is simply acknowledging in 2020 what Andreessen had predicted in 2011.

What does software allow one to do that one could not earlier?

Andreessen answer the question in his essay by pointing out two factors, the first of which I read as unlocking demand:

Over two billion people now use the broadband Internet, up from perhaps 50 million a decade ago, when I was at Netscape, the company I co-founded. In the next 10 years, I expect at least five billion people worldwide to own smartphones, giving every individual with such a phone instant access to the full power of the Internet, every moment of every day.

https://a16z.com/2011/08/20/why-software-is-eating-the-world/

And the second is the disintermediation of technology. That’s a big word, but it is simply explained: the elimination of the middle man.

Consider this post you’re reading right now. You’re reading it on your device (laptop/tablet/smartphone). Much more impressive is the fact that I was able to put up a website, set up an email subscription service, have a personalized email address – and all of this without paying anybody else a single penny to have all this done for me. Don’t get me wrong, I pay Google and WordPress money every month, but at my end, it was a one man show. No IT department, no IT consultant, nothing.

On the back end, software programming tools and Internet-based services make it easy to launch new global software-powered start-ups in many industries — without the need to invest in new infrastructure and train new employees. In 2000, when my partner Ben Horowitz was CEO of the first cloud computing company, Loudcloud, the cost of a customer running a basic Internet application was approximately $150,000 a month. Running that same application today in Amazon’s cloud costs about $1,500 a month.

https://a16z.com/2011/08/20/why-software-is-eating-the-world/

So whether you want to write a blog (yours truly), order food (Zomato), buy groceries (Bigbasket), learn stuff online (Byju’s), get your leaky faucet fixed (Urban Company) – or anything else you can think of really – it is all enabled by the fact that everybody has a device that enables them to connect to the Internet, and the fact that building out a company is cheaper than ever before.

So Who Are The Winners?

Well, I find it pretty cool that I am able to write a blog that a lot of people choose to read daily, and the local pizza delivery place is quite happy that is is able to compete with somebody like Dominos. And hopefully you are happy that you get to read this post while chomping on a slice of pizza.

But the real winners? The intermediaries.

But wait, you might say. Didn’t the internet enable disintermediation? Well, no, not really. It replaced a lot of inefficient middlemen with a few super efficient ones.

If, in the pre-internet era, I wanted to write a series of essays that people could read, the barriers to entry were quite significant. They could be published as a book, or as a series in a newspaper, or in a magazine. But then would come the difficult job of publicizing the fact that I had written these essays. People would send in their comments (maybe via mail, maybe in conferences/book launches) and I would reply to them, but these would be available for everybody to see.

Today? Hit publish, and people who follow me on Twitter/LinkedIn/Facebook get to not only read the essay, but they also get to work as my marketing team, and they get to comment right away. Said comment can be replied to near instantaneously, and that conversation is also available for everybody to view and ponder on.

What allows this to happen? Well, I pay WordPress money to keep this blog up, and I pay Google so that I have a personalized email ID. Without these two companies (and their competition), this blog is well nigh impossible.

What the intermediaries have done is the following:

Earlier, a select group of people could get in touch with a select group of customers at very high costs. Today, anybody can get in touch with anybody at very low costs

A restaurant (let’s call it Vaishali) can get in touch with a potential customer (let’s call him Ashish) and online delivery of food can happen, even in times such as these. I get my upma and filter coffee, Vaishali gets its money, but in the long run, the real winner is Zomato.

A homeowner in Paris (let’s call her ABC) can get in touch with a potential traveler (let’s call him Ashish) and I and my family can stay in said homeowner’s apartment during our trip to France. The homeowner gets money for a home she isn’t currently occupying, I get a memorable holiday, but the real winner is Airbnb.

And so on.

Uber, Oyo, Swiggy, Urban Company – there’s no end to these examples, and these, as per Andreessen’s essay, are the real winners.

The coup de grace

What if these intermediaries were either owned by one entity? What if that entity, because it knew what you were doing in n separate transactions across n different platforms, could flawlessly predict what you needed next, on the n+1th platform? And could provide you that need at the lowest price possible?

Let’s go back to the beginning of this post:

Oil, its linkages, its by-products, and its enabling nature is what attracted Dhirubhai to oil as a business. It wasn’t just about oil itself – it was always about all of what oil allowed one to get into as a business. And it is the same now – it’s not about telecommunications and data. That just enables Reliance to get into – well, everything, really.

https://econforeverybody.com/2020/07/23/really-understanding-jio/

Video: Samir Saran on the Importance of the EU