Tag: amit varma

Harmunia Mode.

Is an inheritance tax a good idea or a bad idea?

Well, it depends.

What does it depend on?

It depends on whether you are a Congress supporter or a BJP supporter.

What else does it depend on?

It depends on whether you are answering this question in 2024, 2019 or 2014.

What does it not depend on?

Economic analysis.

I have read innumerable tweets/messsages today about the inheritance tax. Or death tax. Or estate tax. These are tweets and messages from economic analysts, politicians, think-tankers, journalists and policy makers.

Every single discussion has been about who has said what about inheritance taxes, and when.

Not a single discussion has been about an economic model that underpins the rationale for or against the inheritance tax.

  • What is it about India’s tax buoyancy that justifies (or doesn’t justify) an inheritance tax?
  • What about her demography? Does that have a role to play?
  • What about the loopholes in the Income Tax Act? Do they have a role to play?
  • What about her direct and indirect tax collections?
  • What about threshold limits for imposing such a tax?
  • How and why have other countries done it? Can we learn from their mistakes? Can we learn from their successes?
  • What are the alternatives?
  • If we do implement it, do we keep it in perpetuity?
  • How much money do we potentially raise if we implement it?
  • What might be the downsides?
  • How do we judge the quality of implementation if we implement it?

But no, let’s see who said what and when, call each other names, and prove that we are right and they are wrong. That’ll show them. Bloody losers. It’s because of folks like them that India is what it is today.

https://help.twitter.com/en/using-x/x-advanced-search

Do you want to play the game yourself, and show to members of your tribe how you were right and they were wrong? Click on that link, learn how to search on Twitter by date and by handle, and prove how Your Side Alone Speaks The Truth.

If, on the other hand, you are interested in, y’know, actual economic analysis, allow me to recommend Atkinson-Stiglitz and Diamond-Mirrlees, both from the 1970’s. It’s been a while since I’ve read them, and it’s not a topic I’ve ever particularly enjoyed, but I assure you that these are good places to begin.

But Twitter takedowns are faster and more fun, so there’s that.

As for me and what I think, I think that not only was Amit Varma right about the IPL, but if you ask me, he’s right about the harmunia too.

Are There Too Many Farms in the World?

I have shamelessly copied the title of today’s blogpost.

And the answer to the question is, obviously: yes!

I enjoy being provocative in my Principles of Economics classes, making seemingly outrageous statements to try and provoke my students into heated (and therefore enjoyable) debate. One such statement is this: the best way to help farmers in India is by helping many of them leave agriculture.

It never fails, that statement, and what follows is always a fun debate about the importance of agriculture and how best to help it flourish in India. Which is why I enjoyed reading this brief write-up from the Yale Economic Growth Center:

A new study uses data from India to connect the dots between these two phenomena, showing that farm productivity follows a U-shaped curve with farm size, and that substantial gains in output and income would result if farms in developing countries were significantly larger. The analysis suggests that agricultural consolidation – though a challenging policy prospect – could lead to significant economic growth and poverty reduction.

https://egc.yale.edu/research/rosenzweig-2022

If you are an Indian reading this, I (hopefully) don’t need to explain to you what a typical Indian farm looks like. But if you’re looking for a point of contrast, try going through this fantastic photo essay to understand the difference in terms of scale.

So what’s going on?

Explained in simple terms: on a very small farm, family members work the land, participate in wage work on other farms, and operate their farm efficiently. As farm size increases, the family members increase their level of on-farm work until they are unable to spend any more time working (this point of complete self-sufficiency is known as autarky). Because hiring additional labor comes with additional transaction costs (finding workers and travel costs) and thus lowers net income, the family continues to work the land as farm size increases (decreasing labor to land ratio, or productivity) until such point that the benefit of hiring additional workers outweighs the cost, and productivity starts to increase – which is where we observe the bottom of the curve. After this point, productivity rises with farm size, as larger farms can take advantage of machines that have higher capacity at larger scales and lower labor use – mirroring the economies of scale that are well-observed in developed countries.

https://egc.yale.edu/research/rosenzweig-2022
https://egc.yale.edu/research/rosenzweig-2022

Foster and Rosenzweig, the authors of the paper behind this write-up run the numbers and come up with the following conclusion:

The authors illustrate this point using their model to show that the minimum farm size in India that would maximize return on land using only locally- available machinery is 24.5 acres – over 7 times the mean farm size in India today. If all farms were this size, the number of farms in India would decrease by 82%, total output would increase by 42% and income per farm worker would increase by 68%. However, there would only be a 16% decline in the total agricultural workforce, owing to the under-utilization of labor in most small-scale farms.

https://egc.yale.edu/research/rosenzweig-2022

This isn’t an easy topic to think about, by any means. But for those interested, I have three recommendations:

  1. Small Holdings in India and Their Remedies, by Dr. Ambedkar (written over a hundred years ago!)
  2. The first part of How Asia Works, by Joe Studwell (reading this one might confuse you, for the advice will be at odds with what we’ve been discussing here, but it is a very instructive read nonetheless)
  3. The very first episode of TSATU.

Audiobook Bleg

In general, I prefer reading content rather than listening to it.

I read much faster, for one. And while it is certainly true that I can listen at 2x, it still is faster in my case to read. Plus, no matter how hard I try, listening at 2x doesn’t seem like a – for lack of a better word – nice experience. I know I should be defining this better than simply saying “not nice”, but that’s the best I can do for the moment.

There are exceptions, of course. If it’s an Amit Varma podcast, 2x is an imperative (although I do know folks who listen at 1x). And given the quality of each episode, and given the fact that transcripts aren’t yet available, the opportunity costs are worth it. But in general? Reading trumps listening.

But even in the case of Amit’s podcast, my preferred location for playing it is in my car. I get far too easily distracted during walks – could be a chain of thought that develops because of something that was said on the podcast, could be a dog that walks past me, or it could be a nice little bout of daydreaming. Shouldn’t be happening, and I ought to be worried about my attention span, but now what to do?

In a car, though, it is a different story. The hassle of trying to drive a car through the dynamic jigsaw puzzle that is Pune’s traffic is the perfect semi-distracted environment in which I just have enough attention to give to the podcast and nothing else.

But audiobooks? Never been able to consume them. I’ve tried with a couple, but rarely gone past the first two chapters. I did listen, with my daughter, to a couple of Harry Potter novels during the lockdown (Stephen Fry was a major reason why), but that apart, I haven’t had much luck.

Recently though, David Perell recommended a book called “The Goal”, and specifically recommended the audiobook. I’ve been listening to it, and it has been a very enjoyable listen. I’m about halfway through, and in this case, definitely plan to finish it.

  1. It’s got a lot of dialogues, and the audiobook does a nice job of making them seem very stylistic and entertaining.
  2. The rhythm of the conversations sounds much better when you’re listening to it, and because the book doesn’t contain a lot of dry descriptive sentences, the format really works.
  3. Each chapter is fairly short – about ten minutes or so, and these bite sized chunks work for me when listening.
  4. There is also some background music that plays at the start and during the chapter, and that enriches the experience of listening, at least for me.
  5. The concepts that are being spoken about in the book are directly related to economics, and the treatment is novel enough for me to remain interested.
  6. The fact that these concepts are interwoven with at least two different stories involving the protagonist make for an interesting tale, and that acts as a lovely bonus. It’s a hook that has kept me interested so far.

All of which was to explain to you why I like this particular audiobook – and to explain why I’m more than willing to try some other audiobook content once this one is done.

So: here’s the bleg.

What audiobooks do you think I might like?

Please do let me know, whether in the comments or however else you like.

Thinking Probabilistically

In this past Monday’s post, I spoke about how I disagree with the idea that economics is about putting numbers on everything.

But a conversation I had over the weekend helped me think about how I might be wrong in this regard. If economics is about getting the most out of life, and if there are opportunity costs to everything in life – and I think both of these ideas to be central to thinking like an economics – then thinking probabilistically is a skill more of us should pick up.

Why? Because life is uncertain.

Getting the most out of life requires us to make decisions. These decisions are based on information that is almost always going to be incomplete. This is because acquiring all possible information relevant to the decision making process is an expensive, time consuming process. How do we know if have collected “enough” information? We don’t – we make at best an educated guess.

And regardless of how much information we have collected, we live in an uncertain world. Our best laid plans are likely to go awry. And so we make decisions on the basis of incomplete information, and the outcome of these decisions is uncertain.

For example: which college should I enroll in? I’ll decide this by taking a look at the college website, speak to folks within the college, speak to some of its alumni, maybe visit the college and speak to some professors. I could do this for as long as I like, and as thoroughly as I possibly can. But I will never be able to acquire all information relevant to this decision. And so my decision to enroll in a college is on the basis of incomplete information.

And say you did all the background research, and attended all the introductory seminars, and visited the college, and enrolled in it in, say, 2019. Six months into your course, the pandemic hits. Not your fault, not the college’s fault, and maybe we will never know for sure whose fault it is – but the outcome of your decision to enroll certainly wasn’t one you were expecting.

But this also applies to which chai tapri to visit after having bunked one of the lectures in the first six months. And whether to have a second cutting chai at that tapri. The point is, every single decision needs an evaluation on your part. And this evaluation is always with incomplete information, and the outcomes are always uncertain.

But can you evaluate the probability that things will work out reasonably well? What if, in 2019, you asked yourself about the chance that there would be a major pandemic that would disrupt college life completely? Well, an entirely reasonable approach would have been to take a look at the past one hundred years and ask if something along these lines had taken place. And you would have to conclude, quite reasonably, that the chance of something like this happening was one in a hundred, at best. You should therefore have bet on something like this not happening.

The point I’m making is not that you would have been wrong in this particular case – the point is the process of thinking probabilistically. I’m not saying you should whip out paper and pencil every time you decide to have chai at the tapri. But for most major decisions where probability based calculations are possible, it helps to put a probability based estimate on things working out. You will still end up making the wrong bet every now and then, and that’s fine. The point is that you know the odds (more or less) going into battle, and this helps you decide whether or not to engage in battle in the first place.

Again, I have not read Russ Roberts book just yet, but I think the point he is making in the book is that some problems are beyond the pale of this probability based approach to life. And I still stand by what I said in Monday’s post, economics ought to be about more than putting a number on most things.

But that being said, thinking probabilistically is very underrated, and I would encourage you to get started.

Two final points: my thanks to Amit Varma for a conversation about this that inspired this post. And trust me, he knows more than a thing or two about thinking probabilistically.

And second, via Samarth Bansal, a website that seems very promising in terms of helping all of us learn about statistics and probability.

The IPL and the Benefits of Competition

I was gloriously and completely wrong about the IPL. And I couldn’t be happier about being wrong!

So happy, in fact, that I can’t stop talking about how wrong I was (see here, here and here). The IPL has been beneficial for Indian cricket, and I would argue this holds true for world cricket at large.

It’s one thing to say this in 2022 with the benefit of hindsight, and it is quite another to have said it in March 2008! Here’s Amit Varma from what seems like ages ago:

The problem with cricket in most cricket-playing countries, certainly in India, is that the cricket market is what economists call a monopsony. A monopsony is a market in which there is only one buyer for a particular class of goods and services. Until now, a young Indian cricketer who wanted to play at the highest level could only sell his services to the BCCI. If it treated him badly and did not give him his due rewards, he had no other options open to him.

https://www.espncricinfo.com/story/opportunity-choice-and-the-ipl-342143

I’ve quoted from this piece before, and I would urge you to go read it again. I always urge all of you to read the entire piece, of course. But the reason I’m doing so in this particular case is because it is always a pleasure to read a piece that uses economic theory to make predictions that turn out to be spot on.

Here’s Ian Chappell in a more recent piece:

Apart from the massive financial boost and enormous increase in fan interest, India’s biggest gain from a highly productive IPL competition has been the huge improvement in playing depth.
About 20 years ago, India’s overseas reputation was an improving one, especially under the captaincy reign of a competitive Sourav Ganguly but the pace of that ascent gradually increased when the IPL began 15 seasons back, in 2008. The quietly thoughtful MS Dhoni – who is still exerting an influence – built on Ganguly’s reputation, which was then improved upon by the highly competitive leadership of Virat Kohli.
The firmly established IPL is now seen as the most important part of India’s enviable depth in international cricket.

https://www.espncricinfo.com/story/ian-chappell-india-have-the-ipl-to-thank-for-their-formidable-international-depth-1313912

But what are the economic factors that have been at play in making the IPL Such A Good Thing for cricket in general, and Indian cricket in particular?

Amit listed out the following factors:

  1. The BCCI stopped being a monopsony. Ten (as of this year) franchises bidding for a player, with a reasonably well established feeder system is a very different proposition from depending upon the whims and fancies of a deeply flawed selection system. The results are there for all to see.
  2. The IPL is a competition that is about the money, is about the bottom-line, and this is a good thing. Something that I should have known, but was too besotted with my love of test cricket to see. It forces players to be selected on merit, and also dropped on merit, and merit alone.
  3. The ecosystem for spotting, nurturing and promoting talent is only likely to get better over time was his prediction. See this article about Kumar Kartikeya Singh, and this article about Tilak Varma, published this year on ESPNCricinfo. And if you’re hungry for more, see this on T N Natarajan, and this on Washington Sundar. Sports fans will see the struggle in these stories, but if you think about it from the point of view of an economist, you should credit the IPL for creating the ecosystem that enables the emergence of these players. And indeed, many more to come!

Ian Chappell is making the same points in his write-up as Amit Varma, but for Amit to have done this in 2008, and by using simple economic theory is remarkable. We would do well to absorb the lesson that I think can be learnt from this: don’t be blinded by distractions, and trust in economic theory to work well more often than not.

This is how Amit concluded his piece back then:

Having said that, the IPL could fail, for not every good idea is rewarded with smart execution. Maybe the franchises got carried away and bid too high (game theorists call it “the winner’s curse”). Maybe the games will not get high enough TRPs, as a cricket-loving public deluged with an overdose of cricket finds other ways to entertain itself. If it does flounder, it will be a pity, for its failure will be remembered and used to prevent other such experiments.
On the other hand, if the IPL succeeds, cricket historians may one day write about 2008 as the year that cricket discovered its future.

https://www.espncricinfo.com/story/opportunity-choice-and-the-ipl-342143

It is safe to say that it is the second paragraph that is applicable today, not the first.

And it wouldn’t be the worst idea to learn some of the principles of economics by studying the IPL!

Have we become uniquely stupid?

For those of you who have read the essay, the title of today’s blogpost is a dead giveaway: I am referring to Jonathan Haidt’s essay in the Atlantic, titled “Why The Past 10 Years Of American Life Have Been Uniquely Stupid“. The subtitle is equally depressing: It’s Not Just a Phase.

It’s been clear for quite a while now that red America and blue America are becoming like two different countries claiming the same territory, with two different versions of the Constitution, economics, and American history. But Babel is not a story about tribalism; it’s a story about the fragmentation of everything. It’s about the shattering of all that had seemed solid, the scattering of people who had been a community. It’s a metaphor for what is happening not only between red and blue, but within the left and within the right, as well as within universities, companies, professional associations, museums, and even families.
Babel is a metaphor for what some forms of social media have done to nearly all of the groups and institutions most important to the country’s future—and to us as a people. How did this happen? And what does it portend for American life?

https://www.theatlantic.com/magazine/archive/2022/05/social-media-democracy-trust-babel/629369/

The essay is a lengthy read, but a rewarding one. Jonathan Haidt takes us through the evolution of the internet, with the emphasis on the social aspect really beginning to take off post 2010 or so, and gives us a book to read that goes on my to-read list: Nonzero: History, Evolution and Human Cooperation.

The next section is where the story really picks up, for we are introduced to the “villains” of the piece: the Like, Share and Retweet buttons. It’s not the buttons themselves that are to blame, of course, much like the atom not being at fault for the atom bomb. It’s what we have done with the Like, Share and Retweet buttons that is the problem:

By 2013, social media had become a new game, with dynamics unlike those in 2008. If you were skillful or lucky, you might create a post that would “go viral” and make you “internet famous” for a few days. If you blundered, you could find yourself buried in hateful comments. Your posts rode to fame or ignominy based on the clicks of thousands of strangers, and you in turn contributed thousands of clicks to the game.

https://www.theatlantic.com/magazine/archive/2022/05/social-media-democracy-trust-babel/629369/

Goodhart’s Law is massively underrated. Rather than optimizing for the quality of the content of one’s creation, we optimize for it’s virality. The virality ought to be a function of the quality, but we’ve skipped the intermediate step, with consequences that have become manifest and deep-rooted. Or as Jonathan Haidt puts it, “these platforms were almost perfectly designed to bring out our most moralistic and least reflective selves”.

He then goes on to quote from Madison’s Federalist No. 10 on the innate human proclivity towards “faction”.
I have watched “The Last Dance” on Netflix more times than I should have, but this reminds me of Michael Wilbon talking about how everybody in Chicago hated the Pistons (around the 28 minute mark in episode 4, if you’re interested). He repeatedly involves the phrase “this was personal”, and that’s one way to understand what factionalism means. Tribalism in sports, but elsewhere too, is the kind of factionalism you want to think about in this context, and you might also benefit from reading the transcript of Ezra Klein’s conversation with Tyler Cowen:

https://conversationswithtyler.com/episodes/ezra-klein-2/

Factionalism (or tribalism. I’m not sure if the two mean exactly the same thing in an academic sense, but I am using them interchangeably here) hasn’t necessarily gone down, but we seem to have found new things to be “tribal” about.

As I understand it, Haidt is making the point that our tribalism when it comes to politics is now more deep-rooted than ever, but is also more trivial than ever before. Which politician is wearing what kind of clothes for which occasion excites more debate online than substantive issues that warrant more debate. Or as I prefer to put it, our agreement with stated positions and policies is these days a function of who said it, rather than what has been said. Such tribal loyalty when it comes to close friends is one thing, although even that has its limits, but fealty of such an extreme nature when it comes to political discourse ought to worry most of us.

And as an aside, the last question that Tyler Cowen asks in that extract above is a question to which I don’t have a great answer. I agree with the point in his question, but like him, wonder about the underlying cause.

An extract twice removed now:

The digital revolution has shattered that mirror, and now the public inhabits those broken pieces of glass. So the public isn’t one thing; it’s highly fragmented, and it’s basically mutually hostile. It’s mostly people yelling at each other and living in bubbles of one sort or another.

https://www.vox.com/policy-and-politics/2019/12/26/21004797/2010s-review-a-decade-of-revolt-martin-gurri

Amit Varma made a very similar point in a recent podcast with Shruti Kapila recently, in which he pointed out that social media has, in effect, decentralized the news (I’m quoting from memory here, so please forgive me if I’ve got the exact wording wrong). Amit Varma says that this is on balance a good thing, but with some negative consequences. Jonathan Haidt disagrees:

Mark Zuckerberg may not have wished for any of that. But by rewiring everything in a headlong rush for growth—with a naïve conception of human psychology, little understanding of the intricacy of institutions, and no concern for external costs imposed on society—Facebook, Twitter, YouTube, and a few other large platforms unwittingly dissolved the mortar of trust, belief in institutions, and shared stories that had held a large and diverse secular democracy together.

https://www.theatlantic.com/magazine/archive/2022/05/social-media-democracy-trust-babel/629369/

Where do I fall on this Haidt-Verma spectrum? Closer towards the Haidt end, I’d say, but I do have to remind myself that I have written this and you are reading it, so maybe decentralization isn’t all that bad? But that’s as far as I’m willing to go – on balance, I find myself closer to Haidt’s position, at least for the moment.

But the enhanced virality of social media thereafter made it more hazardous to be seen fraternizing with the enemy or even failing to attack the enemy with sufficient vigor. On the right, the term RINO (Republican in Name Only) was superseded in 2015 by the more contemptuous term cuckservative, popularized on Twitter by Trump supporters. On the left, social media launched callout culture in the years after 2012, with transformative effects on university life and later on politics and culture throughout the English-speaking world.

https://www.theatlantic.com/magazine/archive/2022/05/social-media-democracy-trust-babel/629369/

Haidt is writing this from an American perspective, for an American audience. But we in India have our own share of names for The Other, don’t we? It’s not just the fact that we have relatively trivial tribalism in areas as important as political discourse, but the fact that the discourse itself is not just trivial, but downright nasty. And the nastier it gets, the higher the support from your own side!

I’ll skip talking about a couple of sections from Haidt’s essay, not because they’re not important, but because they aren’t directly relevant to us here in India. But the subtitle of his essay gets an entire section, where he speaks about how things are likely to get much worse in the years (months) to come:

in a 2018 interview, Steve Bannon, the former adviser to Donald Trump, said that the way to deal with the media is “to flood the zone with shit.” He was describing the “firehose of falsehood” tactic pioneered by Russian disinformation programs to keep Americans confused, disoriented, and angry. But back then, in 2018, there was an upper limit to the amount of shit available, because all of it had to be created by a person (other than some low-quality stuff produced by bots).
Now, however, artificial intelligence is close to enabling the limitless spread of highly believable disinformation. The AI program GPT-3 is already so good that you can give it a topic and a tone and it will spit out as many essays as you like, typically with perfect grammar and a surprising level of coherence. In a year or two, when the program is upgraded to GPT-4, it will become far more capable. In a 2020 essay titled “The Supply of Disinformation Will Soon Be Infinite,” Renée DiResta, the research manager at the Stanford Internet Observatory, explained that spreading falsehoods—whether through text, images, or deep-fake videos—will quickly become inconceivably easy. (She co-wrote the essay with GPT-3.)

https://www.theatlantic.com/magazine/archive/2022/05/social-media-democracy-trust-babel/629369/

Speaking of the amount of shit that had to be created by a person, read this article written by Samanth Subramanian in February 2017.

So what might be done? Jonathan Haidt has a three-pronged solution:

What changes are needed? Redesigning democracy for the digital age is far beyond my abilities, but I can suggest three categories of reforms––three goals that must be achieved if democracy is to remain viable in the post-Babel era. We must harden democratic institutions so that they can withstand chronic anger and mistrust, reform social media so that it becomes less socially corrosive, and better prepare the next generation for democratic citizenship in this new age.

https://www.theatlantic.com/magazine/archive/2022/05/social-media-democracy-trust-babel/629369/

He outlines the steps involved in each of these, and if you haven’t already, I would encourage you to go read the entire essay, and these outlines in particular. I find myself to be in broad agreement with both the suggestions as well as how they might be implemented, but also worry about whether we have the political and social will to actually do so.

Finally, a coda of sorts:

The most pervasive obstacle to good thinking is confirmation bias, which refers to the human tendency to search only for evidence that confirms our preferred beliefs. Even before the advent of social media, search engines were supercharging confirmation bias, making it far easier for people to find evidence for absurd beliefs and conspiracy theories, such as that the Earth is flat and that the U.S. government staged the 9/11 attacks. But social media made things much worse.

https://www.theatlantic.com/magazine/archive/2022/05/social-media-democracy-trust-babel/629369/

And I would feel very bad if you, the reader, were to read either my post or Haidt’s essay in order to confirm your already existing fears about the ill-effects of social media. And so I urge you to read this column by Tyler Cowen next:

Calling something “extremist” is not an effective critique. It’s a sign that the speaker or writer either doesn’t want to take the trouble to make a real argument, or is hoping to win the debate through rhetoric or Twitter pressure rather than logic. It’s also a bad sign when critics stress how social media have fed and encouraged “extremism.”
…
…
What the U.S. needs is more consideration of more extreme ideas. If you see someone inveighing against “extremism” or “extremist ideas,” beware: That is itself an extreme position. True moderation lies in calm and reasoned debate.

https://www.bloomberg.com/opinion/articles/2022-05-06/extremist-ideas-are-not-always-bad-and-are-often-popular

My take on this essay? I think Tyler is saying that we shouldn’t be throwing the baby out with the bathwater. Social media has done two things: made it easier to spread “extreme” ideas, and made it much more likely that we will react with extreme prejudice and nastiness to these ideas.

The first of these is A Very Good Thing and the second of these is a Very Bad Thing. But we would do well to hold on to the first, rather than abandon both.

How? Ah, now if only we had some extreme ideas about that.

On Xi Jinping’s Stubborn Attachment(s)

These are not good times for the credibility of China’s GDP growth targets. Just weeks after unveiling an ambitious target of 5.5% real GDP growth for 2022, the central government effectively ensured that target will not be met by requiring local governments to impose strict lockdowns to contain the spread of Covid-19. The restrictions cover most of China’s major cities, have had a clear negative impact on economic activity in March that will only worsen in April.

https://andrewbatson.com/2022/04/18/why-gdp-growth-targets-are-underrated/

So begins a thought provoking blog post on China’s growth prospects for this year, written by Andrew Batson. I’m a very (very!) amateur student of China, and follow a more or less random group of people on topics related to China – but Andrew Batson’s blog, I think, should definitely be on everybody’s list.

This one speaks about growth prospects in China this year, but so much else besides. Let’s learn a little bit about China by parsing through it.

The first point that he makes is that growth targets this year are all but likely to be missed. This, of course, is because of the lockdowns in Shanghai and other parts, and pretty much everybody knows that they’re not going well – and that’s putting it mildly. Targets were missed last year, and the year before – so why, one might be entitled to ask, should one have them at all in the first place?

There’s shades of Goodhart’s Law in the paragraphs that follow, and when I read the piece the first time, my blogging antennae were up. Aha, I thought to myself, one more post in an ever increasing canon. But the post then moves in (for me) an entirely unexpected direction, and in a way that makes it even more interesting.

Targeting GDP growth, Batson says, is not A Perfect Thing, but is, all things considered, Still A Good Thing Given The Alternatives.

https://andrewbatson.com/2022/04/18/why-gdp-growth-targets-are-underrated/

One way to understand Batson’s defense of GDP growth targets is by internalizing what I think is his key point: giving up on a GDP growth target doesn’t mean there will be no targets – it simply means there won’t be economic growth targets.

That is to say (and this is my understanding of his point), it’s not as if giving up on GDP growth targets will mean a very laissez faire approach to the economy. Instead, China will be set other, non-economic targets. Such as what, you ask?

…“regulatory storm” of 2021 with its multitude of highly interventionist policies aiming to reshape entire industries. Limiting the power of large private companies was even a fairly explicit goal: it’s probably not a coincidence that the main targets of last year’s political-regulatory campaigns were real estate and the internet, the two economic sectors that have created the biggest private-sector fortunes. All of this was certainly enabled by Xi’s dictum that there are more important things than GDP growth. The costs and economic downsides of the regulatory storm were put aside in favor of other goals.

https://andrewbatson.com/2022/04/18/why-gdp-growth-targets-are-underrated/

Regular listeners of Amit Varma’s excellent podcast, TSATU will no doubt be aware of the line “Politics is downstream from culture”. The quote is originally by Breitbart, of course, as Amit always points out. The reason I bring it up over here is because economic growth, if you ask me, is downstream of politics. In this framing, economic growth serves political needs, and those political needs are downstream of culture.

Rarely does one get to quote Brietbart in one paragraph and then follow it up with a supporting quote that references Lenin, but hey, welcome to 2022:

…China’s Leninist political system, which is organized around mobilizing officials to direct social transformation. As Ken Jowitt put it: “The definitional tendency of Leninist regimes [is] their attempts to control and specify the substantive dimensions of social developments, not merely the framework within which such developments occur.”

https://andrewbatson.com/2022/04/18/why-gdp-growth-targets-are-underrated/

As Andrew Batson goes on to argue in the following paragraphs, de-emphasizing growth targets in a liberal political framework is very different from de-emphasizing them in a Chinese set-up. The focus on growth for its own sake is very different from the focus on growth to serve other aims. Batson argues that Deng Xiaoping was optimizing for economic growth, and that Xi Jingping is optimizing for national greatness. National greatness includes, but never as a primary target, economic growth.

But that pursuit of national greatness, perhaps, has been taken too far in Chin’s case:

In December, when when Xi chaired the annual Central Economic Work Conference, the signal was clear: the priority is now the “stability” of the economy.
Since then, various political slogans and campaigns have been much less in evidence and the focus has been on more practical short-term measures. Senior officials have even promised not to introduce policies that “adversely affect market expectations”–effectively admitting that they had been doing just that in the recent past.

https://andrewbatson.com/2022/04/18/why-gdp-growth-targets-are-underrated/

I’ve said it before, and I’ll say it again, and this is applicable to individuals as much as it is to nations. Be very clear about the answer to that irritatingly simple question:

What are you optimizing for?

Maximizing Soul

I wrote this essay yesterday, and spent all day on it. I didn’t get anything else done. And in terms of the week coming up, that was an expensive thing to do. But as will become clear after reading this essay, I do not regret it one little bit.

David Perell on The Microwave Economy

David Perell’s latest essay resonated with me, and for multiple reasons. The essay is centered around a point that I have been playing around with for a while: we live in a society that overrates efficiency.

He uses the metaphor of a microwave meal in this essay. Not the kind of microwave meal that Krish Ashok has in mind, but rather the kind of microwave meal that a large number of urban Indians are increasingly familiar with. Cut packet, dump in a bowl, nuke and eat. That kind of microwave meal.

This is a meal robbed of its soul. It is functional, yes. It is, in its own way, nutritious enough. One could argue that it is tasty enough. But there is no romance, originality or effort in it. As Robert Pirsig might have put it, it is bereft of quality.((I am a huge, unabashed fan of Robert Pirsig, and so is David Perell. Pirsig will make numerous appearances in this essay: consider yourselves warned.))

Perell’s essay extends this point about the microwave meal to the economy.((I’d go a step further and say that it is equally applicable to society at large. But I’d rather not go down the rabbit hole of teasing apart the differences between an economy and society in this essay, so I’ll use society from here on in, unless I’m quoting from Perell’s essay.)) Most of what we do in our lives today is centered around the same misunderstanding of convenience that gave birth to the idea of a microwave meal. The result, as Perell puts it, is “an economy that prizes function over form and calls human nature “irrational”—one that over-applies rationality and undervalues the needs of the soul.”

What if, for example, I and my family decided to drive down to Goa for a holiday? Which route should we take? We would do exactly what every right-thinking person in our place would do: look up Google Maps. Whatever route Google Maps suggests is the one we will take. 

Here’s a quote from Zen and the Art of Motorcycle Maintenance, the first of Pirsig’s two books:

“The best ones connect from nowhere to nowhere, and have an alternative that gets you there quicker.”

He wrote this line in the context of learning which roads in America were the best for motorcycle riding, and the next two to three pages are lessons on how to ignore Google Maps. Google Maps wasn’t even on the horizon when the book was written, of course. It is just that Google Maps is the modern day evolution of the idea that Pirsig was battling when it came to choosing roads to ride on. 

That idea being efficiency.

A long, rambling drive through quiet serene countryside might mean an extra day, sure, but isn’t that a price worth paying – at least  worth considering? Pirsig isn’t arguing for never getting there, wherever “there” may be. He is saying the same thing that the poet did, years and years ago. We have lost the desire to stand and stare. The monk said the same thing when he spoke about the journey being as important as the destination. Getting there is important, of course it is. But how you get there is equally important, and we live in a society that doesn’t care about the journey anymore. ((NH4 until Kolhapur and then turn right for Amboli is what we usually do, in case you were wondering.))

Our society over-applies rationality and undervalues the need of the soul. Pirsig knew this, of course. It is why the last part of his sentence speaks about an alternative that gets you there quicker. He knew the coming of Google Maps was just a matter of time.

Perell’s essay is a lament for what might have been: a world that prioritized the soul and not the other way around. There is a lot of truth in it, and I have absolutely no quarrel with Perell’s solution. But his essay helped me concretize something that I have been playing around with in my mind for quite a while, and that is what this essay is about.

Minimization, not Maximization

“We’ve overwhelmingly used our wealth to make the world cheaper instead of more beautiful, more functional instead of more meaningful.” 

That sentence, to me, is the core focus of David Perell’s essay, and I couldn’t agree more. In fact his argument grows even stronger on reflection, because I think the word cheaper is applicable to more than just prices. 

We have also used our wealth, for example, to make the world cheaper in the case of time.

I read more today than I did about ten years ago, but the reading is infinitely more bite-sized in comparison. I much prefer essays to books, blog posts to essays, and tweets to blog posts. ((“Prefer” here is used in the context of what I end up actually consuming of each, as opposed to what I claim to prefer.)) And I suspect I am not the only one. I can make the same argument in the case of sports. We as a society have deliberately and consciously chosen ODI’s over test matches, T20’s over ODI’s, and now of course we have The Hundred. Another argument: of all the hours that you have spent staring at video content across all devices, how many hours were spent in watching movies – as opposed to TV series, documentaries, YouTube videos or TikTok? 

When David Perell says that we have made the world cheaper, what I think he is saying is that we have figured out ways to cheapen the effort that we are willing to put into the act of consuming something. That something could be a meal, but it could also be extended to reading, viewing, or listening as well – and more besides. ((Perell’s essay has a lovely section on the music bit, especially. Do read it.))

The world has also been made cheaper in terms of effort.

I base my buying decisions on the buying decisions that others have made. My PowerPoint templates are standardized ones that Microsoft offers me. My tables in Excel are formatted as per the default mode, or based on the templates made available within the software. What to eat tonight is a function of an algorithm, the title of which is “popular in your area”. Relying upon my own research, or on serendipity is either a lost art, or has become one that is looked down upon.

I teach economics for a living, and the best definition of the subject that I have found comes from a textbook written by Alex Tabarrok and Tyler Cowen:

Economics is the study of how to get the most out of life.

The word “most” in that sentence necessarily implies optimization. And optimization necessarily implies maximizing something, or minimizing something. Getting the most out of life can be thought of in two ways. It could mean living life to the fullest (however you might define this for your own sake). It could also mean getting the most out of life by minimizing time, effort and cost spent on any activity. ((And it could, of course also mean both at the same time. But even in this scenario, which of the two one focuses on the most is going to get us back to the point of this essay.))

Consider an example from my life. I love eating good food. In fact, the point of life, if you ask me, is to have as many good meals as possible. How can we apply the points in the paragraph above to my life?

A good meal on a Sunday, for example, could mean spending all day researching the best version of a recipe for a dish I have in mind, then walking to the market to get the best, freshest ingredients possible, then lovingly preparing them, and then getting the whole dish together, so that friends and family can have a wonderful, relaxed meal together.

I’d call that living life to the fullest. It is all but a guarantee that I get nothing else done on that Sunday, but I have maximized contentment.

On the other hand, I could just order the dish from a restaurant whose version I really like. Or I could decide that this particular dish is too expensive, and just make myself a sandwich instead.

I’d call this getting the most out of life by minimizing time, effort and cost. I haven’t maximized contentment, of course, but I have saved time and effort.

And as you may have guessed, I end up doing the latter far more than the former.

And this for something I really and truly love: eating. We feed our passions, even, by minimizing time, cost and effort, instead of maximizing contentment. Our necessities don’t stand a chance.

That is what we have become: a microwave economy.

The Rajan Economy

Chef Rajan is the chef de cuisine at the JW Marriott in Pune. He has, over the years, become a really good friend. By rights, he ought to be best friends with my doctor. For Chef Rajan has ensured over the past seven years or so that there are far too many inches on my waist. But it is for that very reason, of course, that he and I are such good friends. The man loves to feed people, bless him. 

The Rajan economy is his fiefdom in the JW Marriott. This fiefdom is the 24-hour restaurant in the lobby, called Spice Kitchen. ((His role has changed over the years, of course, and is greatly expanded today. For the purpose of this essay, I will focus on just the one restaurant.)) Procurement, staffing, menu design, day-to-day operations and customer relationship management – Chef Rajan is involved in all of these in one way or the other.

I, my extended family and a lot of other people in Pune are frequent visitors to his restaurant for a variety of reasons. There’s the attention to detail, the friendly customer service, the frequently changing menu and much else besides. But there is one non-negotiable rule that I’ve never broken, and he won’t consider breaking.

There’s never been a question about a discount on the bill.

Chefs who used to be in charge of the restaurant before him have waived off the bill on a couple of occasions – maybe a birthday being celebrated there, maybe some other occasion. Not, let me be clear, because I asked for it. It was their way of deepening the relationship with a customer. And once offered, of course, I was going to take it. Why wouldn’t I?

But ever since Chef Rajan has been in charge of the kitchen (which, if memory serves me right, was in 2015), there has never once been the suggestion of a discount. Not once.

And that has left me even happier as a customer over these past few years.

Because the Rajan economy is not about cost minimization. It is, instead, about maximizing customer delight. ((Which, over the long run, ought to lead to true profit maximization. But this footnote is another essay in the making, so we will leave it at that.)) The Sunday brunches, or brunches on special occasions such as Christmas day, are expensive affairs. ((By Pune’s standards. They are cheap compared to what’s on offer in Bombay.)) But I doubt anybody can walk away from that spread thinking that they did not get their money’s worth. The extent of the spread, its presentation, the quality of the ingredients, the number of times that freshly prepared batches are brought out of the kitchen – all of these speak to the quality of the restaurant. ((Taste is a subjective thing, and so I’ve left it out of the discussion here.))

Chef Rajan’s philosophy at the Spice Kitchen isn’t about cost minimization, it is about maximizing customer delight. Never once have I sat down for a meal at the Spice Kitchen and not been sent a little something that is over and above whatever is on the menu that day. If it is a special occasion, the little something could be quite elaborate. On other days, not so much. But there will always be a little bit more than expected, or a little bit more than is part of the stated deal.

You will pay full price, in other words, but you will get more than you bargained for.

I signed on for an online course conducted by Amit Varma last year, called The Art of Clear Writing. ((Any shortcomings in this essay are down to me, of course, not Amit!)) It was a wonderfully organized course, and was slated to last a couple of months or so. But it is still not over! There is a community that has been formed of present and past students. Talks about writing are organized and a newsletter is in the works. Regular writing prompts are handed out to those who wish to continue practice writing. This writing regularly receives community-based feedback. Again, the price of the course is non-negotiable, but you will get more than you bargained for.

There are two ways to live life and conduct business, when thought about from the framework we have been dancing around in this essay so far. Charge the bare minimum and provide the bare minimum is one of them.

There is an argument to be made to go the Rajan/Amit way instead.

Soul Satisfaction is the Opposite of Cost Minimization

One of my favorite books to read was Anti-Fragile, by Nicholas Nassim Taleb. The key point in the book for me was that there are certain things in the world that don’t do well when exposed to risk. These things we call fragile. There are other things that don’t do badly when exposed to risk. These we call robust. 

Antifragility isn’t about not doing badly when exposed to risk. It is about getting better because of exposure to that risk. Or as he puts it in the book, robustness isn’t the opposite of fragility – it is antifragility.

In a similar vein, I think we have prayed for far too long at the altar of cost efficiency. We have focussed so much on ridding ourselves of inefficiencies in our society that we have killed off the idea of satisfying the soul.

But there is a very good reason for this – our ability to measure everything, everywhere. It may have been a blessing at one point of time, but today, I would call it a curse.

There is this part in a conversation between Tim Ferriss and Seth Godin in which Tim asks Seth about meditation. After Seth’s answer, Tim has a follow-up question about the length of time that Seth spends in meditating, and if Seth has a preference regarding time of day. Seth’s answer is worth quoting in its entirety:

“No. I don’t quantify that stuff. I quantify almost nothing in my life”

Our ability to measure and therefore quantify every single aspect of our lives is increasingly becoming a problem.((I can measure my pulse rate, my O2 levels, my hours of sound sleep, the number of steps I have walked, the number of calories I have consumed, the number of minutes I have spent looking at my phone (and with drilldowns to boot) and a dozen other things with just a smartwatch and my phone. And then tabulate it, analyze it and improve upon it.)) The reason it is a problem is because quantification gives us the satisfaction of having done something about the task ahead of us – whatever that task may be. We have quantified our effort, and analyzing said quantification allows us to become “better” over time.

Let’s use a concrete example: I can measure the amount of time I spend staring at my phone daily. Apps that allow one to do this are freely available on, or even baked right into, all popular mobile operating systems. The reason I want to do this is because I have a lot of work to do in this quarter, and I want to minimize wasted time.

After a week of logging in the data, I can then decide how to either allocate my time on the phone better (more Kindle app, less Facebook), or reduce the number of minutes I spend on the phone daily. 

I might even get good at this. Maybe, after a month, I now spend markedly less time on the phone, and what little time I spend on it, I spend on “good” apps. The problem, however, is that I now have one more thing to do – track, analyze and optimize how I spend my time on the phone. 

That is, because I could measure time spent, I optimized it. The point, however, was to do more work this quarter, not analyze how I am spending my time instead. The quality of the work – what I refer to in this essay as soul satisfaction – is inherently immeasurable. And so we optimize the measurable, and continue to ignore the immeasurable.

It is, unfortunately, the immeasurable that is important.

Now you could, of course, attempt to measure the immeasurable. Chef Rajan, or somebody else at the Marriott could conduct a survey to find out how satisfied the customers are. Amit Varma might circulate a Google Form to find out how satisfied his students are with the course. ((Neither of them have done any such thing.))

But even if this was attempted, the wrong thing would be quantified. ((And it would be imprecisely quantified, but that is a story for another day)) The customer’s satisfaction would be (imperfectly) measured. 

What we really want to measure is how soul-satisfied are the creators with their work, and measuring this is pointless: the creator already knows.

In our rush to find something to measure in order to prove that we are efficient, we measure, analyze and perfect cost, time and effort minimization. And we therefore fail to do what we set out to in the first place: good, high-quality work.

If you will forgive a lengthy extract in an already lengthy essay, David Perell points this out in his essay as well:

As Mumford observed almost a century ago, the world loses its soul when we place too much weight on the ideal of total quantification. By doing so, we stop valuing what we know to be true, but can’t articulate. Rituals lose their significance, possessions lose their meaning, and things are valued only for their apparent utility. To resist the totalizing, but ultimately short-sighted fingers of quantification, many cultures invented words to describe things that exist but can’t be defined. Chinese architecture follows the philosophy of Feng Shui, which describes the invisible — but very real — forces that bind the earth, the universe, and humanity together. Taoist philosophy understands “the thing that cannot be grasped” as a concept that can be internalized only through the actual experience of living. Moving westward, the French novelist Antoine de Saint-Exupéry said: “It is only with the heart that one can see rightly; what is essential is invisible to the eye.” And in Zen and the Art of Motorcycle Maintenance, Robert Pirsig describes how quality can’t be defined empirically because it transcends the limits of language. He insists that quality can only be explained with analogies, summarizing his ideas as such: “When analytic thought, the knife, is applied to experience, something is always killed in the process.” All these examples use different words to capture the same idea.

https://perell.com/essay/the-microwave-economy/

But a headlong rush to measure, analyze and optimize the measurable has resulted in us losing sight of the big picture. We have become a society of optimization through minimization. We’ve become very good at extracting the very last bit of juice out of a lemon. So good, in fact, that we’ve forgotten all about growing more lemons. ((And if I may be permitted to squeeze every last bit out of this analogy: or growing mangoes instead.))

The point was to be as content as possible. We’ve settled instead for being as content as we possibly can be after minimizing costs, time and effort.

Soul Satisfaction Maximization

It is a mouthful, I’ll be the first to admit. And if anybody reading this can coin a better phrase, I’m all for using that one instead. But call it what you will, it is the idea that I am focused on, not its name. We need to move away from minimizing that which we can measure, and try and move towards maximizing that which we can’t.

Cowen and Tabbarok’s definition remains perfectly valid. Economics is indeed about getting the most out of life. All of us are often unclear about what we are optimizing for in life. Is it a fulfilling family life, or is it income, or is it something else? Every economics professor will sooner and later ask her student: “what are you optimizing for?”

I’d suggest a follow-up question: how are you optimizing for it?

And by way of example, let us return to my favorite thing to think about: food.

If, on a Monday night, you are wondering what to cook, don’t think about which recipe can be made as quickly as possible. That would be time, effort and cost minimization.

Choose instead, the recipe you want to make, and cut out everything else in your life that stops you from making that recipe. And if this still doesn’t give you enough time, then try to see if you can eliminate certain steps in the recipe. See if certain steps can be done in advance. See if hacks can be used to accelerate certain processes.

In other words, what you want to maximize is non-negotiable. Don’t give up on your dream. But compromises in order to achieve that dream – well, that is inevitable. 

Let me put it another way. Consider these two statements:

  1. This is all I have to give. Under these circumstances, which dream is most attainable?
  2. This is my dream. Given my circumstances, what do I need to do to attain it?

I argue that we have, as a society, grown far too comfortable with the first idea, and we need to learn to do more of the second.

But whatever you do, don’t microwave a meal. 

Nilay Patel interviewed Marques Brownlee, and I took notes. Lots of notes.

I’ve been watching MKBHD videos for a while now, but a favorite activity for my daughter and I this past summer has been to watch them together.

As anybody who has watched them will attest to, they’re impeccably produced, and always manage to strike that perfect balance between being fun and informative. And trust me, getting that balance right is hard. But my daughter, who notices these things much more than I do, also points out his (Marques Brownlee‘s) diction, the way he sets up his backgrounds (or set, or whatever you call it) – and also how much better his voice seems to be than in other videos.

And since she’s mentioned it, it’s hard to ignore. It’s clear that a lot of work goes into producing these videos – and to put out over a hundred of them in one year is seriously impressive – which his channel did last year. What’s even more impressive is the fact that he plans to launch more channels this year, let alone videos.

I got to know about this in a very well done podcast, in which Nilay Patel spoke with Marques about what I wrote about in the preceding paragraph, and a whole host of things besides. Reading the transcript as an economist was interesting, for a lot of things resonated with concepts we teach (and don’t, but should) in class. They weren’t referring to the concepts, of course, for both are (probably) blessedly unaware of boring ol’ econ texts – they were just solving, or thinking, about the challenges they face in the course of their work.

But if you’re somewhere between the age of 18 to 24, and wondering where the hell (and how) to apply things we teach you in your classes – well what better way to learn than this? Ec101 applied to MKBHD videos – whatay way to learn, no?

Notes and brief explanations follow:

  • “You’ve got to embrace uncertainty.”

    A point that both of them agreed upon, and the context was noise in the background. As a statistician, when I think noise, I’m thinking randomness, and that makes this quote even better. You can have the most refined system in the world for doing stuff, but you have to make leeway for unanticipated stuff. Things can go wrong, pandemics can spread, neighbours can make lots of noise. Anticipate it: embrace it!

    The larger point, in simpler words: make a plan, of course, but budget for chaos. It’s always there.
  • “I couldn’t believe I was finding something that I didn’t see in those other videos. So I was like, the obvious answer is to add to that collection of information, so when someone else is choosing what to buy, they can make a better choice than I did.”

    Scratch your own itch is advice that you often hear in entrepreneur world, and Marques is speaking about exactly that over here. Except of course, he isn’t just speaking about it, he is quite literally doing it. In fact, he did it 11 years ago, and has just kept at it ever since. That’s a pretty good business model, if you ask me.

    Teach like you wish you had been taught is what I want to do in life, by the way, although I cannot claim to have come anywhere close to figuring a business model out.
  • “So there’s a lot more going on, but I think the teamwork of it all is something that can be pretty underrated.”

    Marques says this in the context of how he plans to scale up his work this year. Here’s the thing – learning how to do something (assuming you want to learn it in the first place) is a lot of fun. Teaching others how to do it is also a whole lot of fun.

    Building a team of such people, and getting them to do what you want to get done – and that too, just so – that is oh-my-god-hard. “Pretty underrated”? That’s pretty understated!
  • “We have a big cast of characters at The Verge. MKBHD, that’s just you. You are a pretty unscalable property. That group of people you’re bringing in and hiring, is that to help you spend more time in front of the camera or is that an attempt to scale you in a different way?”

    Marques’ answer is pretty instructive, but if you’re looking to start a business, and looking to scale it, one challenge you will face is getting folks to do what you want them to do, plus anticipating the fact that in businesses such as this one, Marques himself is the biggest draw. Imagine The Seen and the Unseen without Amit Varma, or Mark Wiens’ videos without Mark Wiens. You have two choices: plan on not scaling, or fight a very hard battle. It’s easy to draw a diagram that teaches you the theory of scaling – doing it in the real world is bloody hard.
  • “You were just intently focused on completing a motion graphics course that you had been taking. And now it’s several years later and you’re not that deep in the weeds. You’ve just hired a motion graphics person and you’re talking about scaling your business and using your facilities in a different way.”

    That’s part of a question that Nilay asked Marques, but if you’re not thinking pin factory, your econ prof and you need to talk. One important part of scaling is what Adam Smith referred to as the division of labor. You can’t – nobody can – do every single thing in a business. Some parts of it need to be outsourced to lawyers and PR firms, as they speak about in the interview later, some parts to motion graphics persons – whatever.

    But you have to let certain tasks go. Which tasks? To whom? How to recruit the most perfect person possible? How to get that person to stay? How to get that person to work with the other folks on the team? Pretty underrated indeed!

    Oh and by the way, this part we don’t teach you in college. We should, if you ask me, but we don’t.
  • “We’ve basically shot all of our videos with my directors on Zoom and I’m just like, “man, this is not even close.” It’s very fun, and then that novelty fades and you just miss having everybody there.”

    This might not be true (hopefully!) after 2021, but if you’re looking to intern this summer, or start work this year, this is a real problem. Americans have this thing they call “watercooler conversations”. If you’re Indian, we’re talking about chai/sutta breaks. Doesn’t matter if you’re a smoker or not, that’s not the point. Conversations in a more relaxed environment after you’ve been in the heat of battle together is where informal debriefings happen, and that is going to suffer this year. There are businesses trying to virtualize this – but color me skeptical. In person is always better, and that’s the worst part of graduating in this of all years.
  • “One question from our video team that I thought was really interesting: as you’ve been on the path of growing bigger and bigger, you haven’t had a boss. How do you grow and improve when the audience is overwhelmingly telling you that you’re great? Where do you find the incentive or the self-criticism to improve? You’ve obviously wildly improved over time, but where does that really come from?”

    Marques’ answer to this question is worth reading in its entirety, but the larger point is that you need people who have the ability to give you frank feedback. That’s hugely underrated. A spouse, a friend, a significant other, a business partner, a junior – whoever. But you need it!

    This reminds me of a reply that Seth Godin gave to a question Tim Ferris asked him in a podcast some years ago:

    “But the other kind is so rare, so scarce, so precious I only get little dribs of it now and then. Which is someone who gets you, someone who can see right through to your soul who, with generosity and care, can look you in the eye, hand you back something and say: I think this would be better if you did it again. I had a business partner, Steve, who was like that in 1979 and ’80, ’80 and ’81. And finding that again in a consistent way is really precious and really hard.”

    (It goes without saying: listen/read the whole interview. Just wonderful.)
  • “We’ve never really set view count goals, but we did have a goal to make 100 videos in the calendar year and we did end up doing that, which is great. A lot of that stuff that we’re aiming for is more, I guess qualitative is the word, but it’s hard to define.”

    What are you optimizing for? This is related to yesterday’s post, and it ought to be a question you ask yourself everyday. I don’t ask myself this question everyday, but I wish I did. It really and truly helps, because if what you are doing isn’t helping what you’re optimizing for, then you shouldn’t be doing it.

    Marques isn’t optimizing for views. He’s not looking to maximize hits, views or any of those metrics. He’s setting a target for quantity, as he says in the quote above, but he also is (implicitly in the quote, but trust me explicitly in his work) optimizing for quality. As I said towards the end of yesterday’s post, get the process right. The rest takes care of itself. (See also: Goodhart’s law)

    Also read this excerpt from Tyler Cowen’s interview of Jimmy Wales:

    “When we think about things at Wikipedia — for example, we could probably increase engagement if we use some of the very basic machine learning techniques to start showing people random promotional links to other things than Wikipedia and then have the machine learn over time how to show you links that are more interesting so that you end up staying on the site longer.

    Now, it might turn out that that’s completely normal and thoughtful, in fact, if you go to a well-known economist, that it turns out that the way to keep you on the site longer is to show you other concepts of economics and economic theory. But it might turn out, and probably would turn out, the best thing to do is, when you go to look up Tyler Cowen, to show you on the sidebar links to Kim Kardashian, Donald Trump, whatever the hot topic of the day is and so on, which is not really what you want from an encyclopedia.

    When we think about that, our incentive structure at Wikipedia is not to optimize time on-site. It’s to say, look, every now and then, normally at the end of the year, we say, “Hey, would you donate some money?” Nobody has to donate. The only reason people do donate — and this is what donors tell us — is they think, “This is meaningful. This is important to my life. This should live. This should exist.”

    Bottom-line: If you are not clear about what you’re optimizing for, you will struggle. Get that clear, for yourself, and be ruthless about sticking to it. (It’s easy for me to say this, but it is very difficult for me to do it. Just so we’re clear!)
  • “I live inside of Google Calendar and Google Tasks. I would be a lost human without those things. I kind of think about this a lot — how much time I spend doing the thing versus managing how we make the thing. And it turns out that the management part has become a lot more of my job, but almost necessarily, to make it a better thing.”

    Managing time is hard. It is really, really, really hard. I have tried I don’t know how many different things, apps, methods and what not, but it is hard. If you are going to make a plan (for spending your day, for studying for your exam, for starting a business, whatever) budget twice the amount of time you think you will take to do something, because you will waste time. That, I am sad to say, is my lived reality.

    Nilay’s next question is about exactly this, by the way.
  • “I think I tweeted a couple of weeks ago how many emails I get that are just like, “Hey, this is us. We’ve got this idea. When can we hop on a call?” But I don’t really want to do that. If you can’t get your idea down in a couple sentences in an email, it’s probably not a good enough idea.”

    Something that I have started to do over the last two years or so: whenever I have to give an assignment, it’s usually along these lines.

    “Write in fifteen sentences (or lesser) your understanding of [whatever it is that they’re supposed to write about]. No conjunctions, no colons, no semi-colons.”

    It is fascinating to me how what seems to be good news to the students turns out to be a problem, because Pascal.
  • “We say no to 99 percent of the things that we get offered to do. But that last 1 percent of things, we think very deeply about, and work with a lot of people to try to make the right decisions and pull it off well.”

    Derek Sivers has an interesting book about this.
  • “If it’s a bad product, it’s not worth doing it at all, even if we would’ve made a ton of money. If it’s a bad integration or if it’s a bad company to work with, I have to say no, because it just doesn’t fit. So that fit is often more important than the math of the per-minute or per-project basis.”

    The preceding questions (to this quote) are about what metrics Marques uses, and you should read about it if you are in this business, but the larger point is what Marques is saying here – and this was referred to earlier in this post as well. Metrics are all well and good, but do the work – and work means quality work. The rest follows.
  • “I know celebrity culture is different in everyone’s heads, but I look up to Michael Jordan the athlete and nothing else about him.”

    My personal opinion, but that is exactly how it should be. But that is a separate post in its own right.
  • “The way I see YouTube is, it’s kind of like driving for Uber. If you stop driving for Uber for a week, you won’t make any money that week. And I think adding more people to this team makes it feel like putting that Uber on autopilot so I’m not doing quite as much of the lifting, but it still has to drive.”

    Read The Four Hour Work Week.

Up until the last bullet point above, this post was 2,455 words in length. That, I suppose, is about enough for a blogpost. But there’s more, much more, in this interview. So please, read/listen to it in its entirety.

But hey, I’m clearly on a roll, so I cannot resist one final piece of advice. Take notes, and write down your thoughts about what you’ve consumed. Even if nobody else is ever going to read it.

It really and truly helps.

1917, Value in Use and Value in Exchange

It is one of the first concepts to be taught in introductory economics – or it ought to be, at any rate. Value in use, and value in exchange, that is.

The concepts simply mean that any particular thing – “good”, as we economists call it – has potential value either because we use it, or because we are able to sell it. Water, the canonical example, has clear value in use, but as a general rule, not that much value in exchange. That’s debatable, but we’ll move on for now.

You can either consume a good, or sell a good to buy other goods. The first is value in use, and the latter is value in exchange.

Here is a short explainer.

 

One of the most powerful movies I saw this year was 1917. For those of you who haven’t seen it yet, it shows you a slice – and a rather uncomfortable one – of what life was like during the Great War, or WWI. Read the review I’ve linked to, but also please watch the movie.

 

What do the two things I’ve spoken about have to do with one another?

In the movie 1917, the two protagonists are talking about a medal that one of them received for bravery. The recipient speaks about how he sold it for a bottle of wine.

I can’t find a clip of this on YouTube at the moment, but here’s a description of the scene from Vulture.com:

“After they cross through the German trenches — a sequence that starts with the men staring at bags of shit and only gets more harrowing from there — Blake and Schofield arrive in the open countryside. It’s a view not often seen in World War I movies, which rarely venture beyond the trenches, and it provides an opportunity for the film to slow down and relax. The soldiers get into a debate about whether there’s any meaning to be found in the war. Blake, who, true to his name, is the romantic of the pair, has learned that Schofield traded his Somme medal for a bottle of wine, and berates him. “You should have taken it home,” Blake says. “You should have given it to your family. Men have died for that. If I’d got a medal I’d take it back home. Why didn’t you take it home?”

Schofield disagrees, with the bitterness of a war poet: “Look, it’s just a bit of bloody tin. It doesn’t make you special. It doesn’t make any difference to anyone.””

That excerpt is from an email I sent to Amit Varma. It was meant to be a pitch for a series that used to run on a website called ThinkPragati (no longer up and running as a magazine, alas). The series was called Housefull Economics, and it seems as if I ended up writing the last column to appear in that space.

But what can’t be written there can be written here! That clip, the one that is described in the excerpt above, is a great way to think about value-in-use and value-in-exchange. Of what use is a piece of metal to Schofield? In war torn France, no use at all – in use.

But in exchange? Why, it got him a bottle of wine!

 

There is another concept at play over here, that of signaling. Blake is clearly horrified at the idea that something as valuable as a medal could be exchanged for something as trivial (to him) as a bottle of wine. Blake is effectively saying that sure, there may not be much value-in-use of the medal right now, but it has tremendous value in terms of signaling.

About which we shall speak a lot more on the coming Thursday, for signaling is a very fascinating topic indeed. But in the meantime, please do read the rest of the columns from the Housefull Economics series – they’re a great way to learn about economics!