Culture, Technology, Economics and Subtitles

Scale, Countries and Organizations

Excerpt 1:

“The Rise and Decline of Nations” put forth Mancur Olson’s theory to explain macroeconomic growth. Why do some countries grow quickly and others slowly? Why do some countries grow quickly at some times and slow at others? Though he doesn’t claim that it is the only factor, he answers that a main reason for this effect is that over time, in stable countries with unchanged boundaries, distributional coalitions (interest groups, collusive organizations) start to form and grow. The longer the country is stable, the more distributional coalitions it will have. These groups influence politics to gain benefits for their group, thereby imposing economic inefficiencies on the country.

Excerpt 2:

If you compare a Starbucks of ten years ago to a current one, they’re virtually the same. Compare this to the originals in Seattle, and the difference is startling.
The same goes for the design of a typical McDonald’s.
Apple launched the Mac with about a dozen full-time people working on its development. Today, they have more than a thousand times as many engineers and they haven’t launched a groundbreaking product in a while.
The same goes for Google. And Slack.
It’s not just famous big brands. Just about every organization hits a point where the pace of innovation slows as scale increases.

On the face of it, these might not seem very (or even at all) similar, but if you ask me, the underlying commonality is that both excerpts are talking about why and how continuing to grow at the same rate once you’re talking about a large organization (or a country) is very difficult.

Seth lists out a number of possible reasons for why firms innovate less over time:

  • Technical debt (shortcuts taken to make sure things work for now, future complications be damned)
  • Handshake overhead (the article I’ve linked to refers back to Seth’s post, but also has an interesting application of the idea)
  • Customer commitments (existing customers would prefer that you stick with the tried and tested, rather than try new things)
  • Partner preferences (same point as above, but with folks/organisations you work with, not customers)
  • Wall street’s fear (don’t rock the boat, go with what works)
  • Managerial anxiety (when leadership is replaced with bureaucracy that much rather do the bare minimum rather than experiment and try risky things)

Seth goes on in his post to talk about potential solutions to this problem. He mentions two things:

  • Boring as a strategy: iterative improvements on a regular drip schedule, and nothing out of the ordinary, ever.
  • Structural bankruptcy: by which he means one should ‘spin off the cash cow’ and go do something new with a brand new team.

Can these ideas be applied to nations? That is, can these solutions work to arrest the decline of nations? The decline of nations is a hard thing to define, let alone measure, but I think I am safe in assuming that we ‘kind of know it when we see it’. That won’t pass muster in a classroom discussion, let alone an academic paper, but you’ll allow me this laxity in a blog post, I hope. Here’s a thread that might help explain what I’m trying to get at.

I don’t know if these ideas can be applied to nations, but it is certainly true that (some, but not all) nations have a problem that needs addressing:

Andreessen’s essay ends with a call for mentorship, social pressure, and a realignment of priorities. “Every step of the way, to everyone around us, we should be asking the question, what are you building?” He writes. “What are you building directly, or helping other people to build, or teaching other people to build, or taking care of people who are building? If the work you’re doing isn’t either leading to something being built or taking care of people directly, we’ve failed you.”
I don’t think that’ll be enough. So let me end with my answer to Andreessen’s question: What should we build? We should build institutions biased toward action and ambition, rather than inaction and incrementalism.

But the problem lies in that fact that ‘spinning off the cash cow and doing something new with a brand new team’ might be possible in a firm, but is all but impossible in a country with a democratically elected government, and that is (almost certainly) a good thing:

But that means doing the difficult work of reforming existing institutions that aren’t going anywhere. You can’t sidestep the existence of the government, as too many in Silicon Valley want to do. You have to engage with it. You have to muster the political power to rebuild parts of it. And then you need to use the government to make markets competitive again.

It makes me tired just thinking about what that paragraph means in practice, let alone trying to figure out how to come up with a plan for it… and definitely let alone trying to implement a plan like that. But it is oh-so-necessary, and not just for the United States of America.

The Rise and Decline of Nations, by Mancur Olson is a great book to read (but take your time over it, please). Read it, and reflect on how to use the ideas in that book to either arrest or prevent a decline in your own nation.

But also reflect on how that book has the power to help you explain why the organization you are working for may be in decline, and that, for me, makes this book a truly great one:

The persuasiveness of a theory depends not only on how many facts are
explained, but also on how diverse are the kinds of facts explained. Darwin’s
theory offers insights into the origin and evolution of creatures as diverse as
whales and bacteria, and this makes it more convincing than if it could explain
only mosquitoes, however many millions of mosquitoes might be satisfactorily
explained. If a theory explains facts of quite diverse kinds it has what William
Whewell, a nineteenth-century writer on scientific method, called
“consilience.” Whewell argued that “no example can be pointed out, in the
whole history of science, so far as I am aware, in which this consilience…has
given testimony in favor of an hypothesis later discovered to be false.

Olson, M. (2008). The rise and decline of nations. In The Rise and Decline of Nations. Yale University Press.

Professors Koyama and Rubin Explain How the World Became Rich

To be honest, you really should read the entire book. But then again, it is freakishly expensive by Indian standards, and the interview we’re about to discuss serves as a very good introduction to thinking and reading more about this subject, so let’s get started.

If you play the animation in that chart (and make sure you have tick-marked the “Relative change” box), you should be struck by two questions. Well, I am, at any rate.

  1. Why the hell did it take so long?
  2. What the hell happened about two hundred years ago?

And the interview is about precisely these questions, but before we get there, a slight digression.

My way of getting students interested in the topic of macroeconomics is by showing them Gapminder, and then asking them a seemingly simple question: why does the world look the way it does?. That is, why did the countries that are rich today (on a per capita basis) get that way?

Some students say it is because those countries have a smaller number of people, and I say that by logic China ought to be poorer than us. Some say it is because those countries were never colonialized, and I say that by that logic Singapore ought to be a very poor country, and so also South Korea. This goes on for a while, but I eventually get the discussion around to two central questions/conclusions.

First, is it likely that we will ever know for certain, and if so how? Or are we doomed to just faffing around for ever?

And second, if we do find out, can we apply some of those lessons in India’s case today? That is, if at all there is a recipe for growth, does it remain applicable across time and space?

And as Robert Lucas put it (in a different but very related context), it is very hard to stop thinking about these questions once you start thinking about them!

The book in question, How The World Became Rich, with its subtitle ‘The Historical Origins of Economic Growth’ aims to answer these very questions. And as anybody who has attempted to study a subject such as this know, this is A Very Hard Thing to do. Here is the description from the Amazon page:

Most humans are significantly richer than their ancestors. Humanity gained nearly all of its wealth in the last two centuries. How did this come to pass? How did the world become rich?
Mark Koyama and Jared Rubin dive into the many theories of why modern economic growth happened when and where it did. They discuss recently advanced theories rooted in geography, politics, culture, demography, and colonialism. Pieces of each of these theories help explain key events on the path to modern riches. Why did the Industrial Revolution begin in 18th-century Britain? Why did some European countries, the US, and Japan catch up in the 19th century? Why did it take until the late 20th and 21st centuries for other countries? Why have some still not caught up?
Koyama and Rubin show that the past can provide a guide for how countries can escape poverty. There are certain prerequisites that all successful economies seem to have. But there is also no panacea. A society’s past and its institutions and culture play a key role in shaping how it may – or may not – develop.

As the excerpt says, there are many, many theories about why some countries got a headstart on the others. And while we can’t ever be sure of what the exact mixture of theories is, and whether this mixture remains the same for all countries across all periods, we can be sure that any recipe must contain at least some of these ingredients. And that’s better than knowing nothing, eh?

But which ingredients? In the next section, my notes from having read the article

  1. The Fate of Rome, by Kyle Harper, is now added to the list.
  2. Life slowly got better across the centuries from the time of the Roman Empire until the Middle Ages, but many of these changes could be explained by major demographic changes (such as, say, the Black Death and the resultant decrease in the population.)
  3. Sustained economic progress necessarily needs sustained technological progress. And sustained technological progress needs to be high enough to be able to beat the inevitable downward pressure imposed by population growth. They also add property rights as an important component, but it is, in essence, enough technological progress to be able to beat the inevitable Malthusian Trap.
    “Ultimately (and this matters for the acceleration in growth we observe from the late 19th to the 20th centuries), it also helps if families limit the number of children they have. This does not necessarily contribute to innovation, but it does mean that innovation will more quickly translate into growth.”
    Of course, the next logical question to ask is why would families limit the number of children they have, and to me, the answer is that they will only do so if they are convinced that their children have a more than reasonable chance of surviving into adulthood. Health comes first, both for individuals, but also for economic growth.
  4. This is an article I will need to read carefully, on the debate between historians and economic historians. The topic? What role did slavery have to play in the economic development of Europe.
  5. Remember the ‘ingredients in the recipe’ analogy that I used in the previous section? Institutions (such as property rights, labor unions), the demographic transition and education are three things that Professors Koyama and Rubin completely agree upon.
  6. “I think one thing the history of technology has taught us is that as long as the incentives are there for innovators to innovate, we will continue to be surprised.”
    I think this to be a key sentence, and I wonder if we think hard and often enough about whether the world is incentivizing innovators enough.
  7. Capitalism without Capital is also added to the list. Sigh.

Lessons from the eradication of smallpox

Vox has a nice and short read out on the battle against smallpox, and lessons we might learn today from how and where the battle was waged, at what costs, and with what effects.

But for all that the world has lost in the last few years, the history of infectious disease has a grim message: It could have been even worse. That appalling death toll resulted even though the coronavirus kills only about 0.7 percent of the people it infects. Imagine instead that it killed 30 percent — and that it would take centuries, instead of months, to develop a vaccine against it. And imagine that instead of being deadliest in the elderly, it was deadliest for young children.
That’s smallpox.

My notes after having read the article:

  1. Smallpox is estimated to have killed between 300 million to 500 million people in the 20th century alone
  2. We still do not have an effective treatment against smallpox
  3. There are two different viruses that cause smallpox: variola major and variola minor
  4. We no longer need to explain R0 to anybody, thanks to covid, but this point is staggering: it had an infectiousness of between 5 to 7, and a mortality rate of 30%.
  5. “In China, as early as the 15th century, healthy people deliberately breathed smallpox scabs through their noses and contracted a milder version of the disease. Between 0.5 percent and 2 percent died from such self-inoculation, but this represented a significant improvement on the 30 percent mortality rate of the disease itself.”
    What a horrible lottery to play. Would you play this lottery? This, by the way, is one of the many reasons why learning statistics and probability is worth your time.
  6. Learn more about Edward Jenner.
  7. We have better ways of shipping vaccines across the world these days, but what a story this is!
    “Spain especially struggled to reach its colonies in Central and South America, so in 1803, health officials in the country devised a radical new method for distributing the vaccine abroad: orphan boys.
    The plan involved putting two dozen Spanish orphans on a ship. Right before they left for the colonies, a doctor would give two of them cowpox. After nine or 10 days at sea, the sores on their arms would be nice and ripe. A team of doctors onboard would lance the sores, and scratch the fluid into the arms of two more boys. Nine or 10 days later, once those boys developed sores, a third pair would receive fluid, and so on. (The boys were infected in pairs as backup, just in case one’s sore broke too soon.) Overall, with good management and a bit of luck, the ship would arrive in the Americas when the last pair of orphans still had sores to lance. The doctors could then hop off the ship and start vaccinating people.”
  8. Institutions matter:
    “It was not until the 1950s that a truly global eradication effort began to appear within reach, thanks to new postwar international institutions. The World Health Organization (WHO), founded in 1948, led the charge and provided a framework for countries that were not always on friendly terms to collaborate on global health efforts.”
  9. Culture matters:
    “Efforts by the British Empire to conduct a smallpox vaccination program in India made less progress, due in large part to mistrust by the locals of the colonial government.”
  10. Science matters:
    ” “There was no shortage of people telling [the people involved in the eradication effort] that their effort was futile and they were hurting their career chances,” former CDC director William Foege wrote in his 2011 book House on Fire about the smallpox eradication effort.
    But other advances had brought it within reach. Needle technology had improved, with new bifurcated needles making it possible to use less vaccine. Overseas travel improved, which made it easier to ship vaccines and get public health workers where they were most needed, and provided impetus for worldwide eradication as it made it more likely that a smallpox outbreak anywhere in the world could spread.”

As always, read the whole article. I’ll quote here the concluding paragraph from the piece, and I’d urge you to reflect on it:

The devastation of Covid-19 has hopefully made us aware of the work public health experts and epidemiologists do, the crucial role of worldwide coordination and disease surveillance programs (which are still underfunded), and the horrors that diseases can wreak when we can’t control them.
We have to do better. The history of the fight against smallpox proves that we’re capable of it.

Video for 19th July 2020

Keep an eye on China stories #1

  1. This one isn’t about China per se, it is about how the corona virus is caused by 5G – but the story does begin with Wuhan:
    ” Sploshing about this sludge are six main coronavirus conspiracy theories: that 5G is, somehow, dangerous; that 5G worsens the effects of coronavirus by weakening your immune system; that 5G outright causes coronavirus-like symptoms; that the coronavirus lockdown is being used as cover to install 5G networks; that Bill Gates had something to do with it; and, finally, that this is all an Illuminati mass-murder plot. None of these conspiracy theories have a shred of truth in them, while some are outright dangerous.”
  2. Imagine that you are a Chinese strategist. What course of action would you recommend when you see the level off hatred and venom the world has towards China?
    “I think that’s exactly right. For years, people who think seriously about China’s political trajectory have said that the biggest risk in the US-China relationship is that there will come a time when China, because of something like an economic depression, would need to rally people around the flag in a particularly acute, brittle, aggressive way. This tool has been built into Chinese politics: When needed, you can direct your animus, your political energy, against a foreign opponent.”
  3. Ananta Nageswaran on much more than just China bashing:
    “For two nations to collaborate, both sides have to trust each other and share information. In the case of Covid-19, the People’s Republic of China did not do so. Just to recap, there were three major failures and at least one of them continues to this day:(1) Suppression of the flu outbreak for five to six weeks

    (2) Banning travel from Wuhan only to other parts of China

    (3) Not reporting the true number of infections.

    One does not even have to go into the spin on controlling the infection more efficiently than others; ridiculing other nations and even daring to suggest that the virus originated elsewhere.”

  4. “All Chinese businesses, large and small, have struggled since COVID-19 emerged at the beginning of this year, forcing stores, restaurants, and factories to cut down on hours or completely shutter. While the full economic impact of the outbreak on China’s economy is still uncertain, popular business writer Wú Xiǎobō 吴晓波 detailed in a recent report that about 247,000 Chinese companies declared bankruptcy in the first two months of 2020.”
    Here we go…(This link is from Mahesh Avasare)
  5. China, or the USA? The world?

A (surprising) profile, a surprising result,a Maharaja(h) in the Yorkshire Dales, Driverless Cars and (non)ergodicity

Can you guess what this article is about, who has written it, and when?

The dirty little secret on Wall Street is that the men responsible for its current reputation were not exceptionally bad. They were just ordinary people placed in unusual circumstances.

“Knowing somebody” to “get the job done” is older than you thought, is applicable in more places than you’d expect, and last across a longer time horizon than you’d have expected. Well, I don’t know about you, but each of these was true in my case.

The main empirical analysis of this article compares a snapshot of the location of mission stations in Africa in 1903 to the precise locations of projects funded by the World Bank in 1995–2014. The unit of analysis is derived from a grid of 55km×55km square cells covering the African mainland and Madagascar. The results imply that the presence of (at least) one mission station increases the probability that an area is allocated a development project by approximately 50 percent.

A rather macabre excerpt, but to me a revealing one. On “The Maharajah of the Yorkshire Dales

The first ethnically Indian minister in Britain was Parmjit Dhanda. He too found a rural seat, out in the West Country, in Gloucestershire. People were almost always polite and pleasant to him, but one morning he came out and found a severed pig’s head on the bonnet of his car.

The year was 2010.

Vox explains the current state of affairs when it comes to driverless cars, and how long that might take (short answer? A little bit longer, but no idea exactly how long. Sorry.)

There are two core statistics useful for evaluating how advanced a self-driving car program is. One is how many miles it has driven. That’s a proxy for how much training data the company has, and how much investment it has poured into getting its cars on the road.

The other is disengagements — moments when a human driver has to take over because the computer couldn’t handle a situation — per mile driven. Most companies don’t share these statistics, but the state of California requires that they be reported, and so California’s statistics are the best peek into how various companies are doing.

On both fronts, Google’s sister company Waymo is the clear leader. Waymo just announced 20 million miles driven overall, most of those not in California. In 2018, Waymo drove 1.2 million miles in California, with 0.09 disengagements every 1,000 miles. Coming in second is General Motors’ Cruise, with about half a million miles and 0.19 disengagements per 1,000 miles. (Cruise argues that since it tests its cars on San Francisco’s difficult streets, these numbers are even more impressive than they look.)

A topic that more students of economics should know about: (non)-ergodicity.

First is a very micro level concern: behavioural biases. The whole idea of endowment effects and loses aversion make sense in a world dominated by non-ergodic processes. We hate losing what we have because it decreases our ability to make future gains. Mathematics tells us we should avoid being on one of the many losing trajectories in a non-ergodic process.

RoW: Links for 14th August, 2019

Five links about gun control from the United States of America:

  1. First, from Chriss Blattman, who knows a thing or two about violence.
  2. Slatestarcodex, on trying to make sense of the data
  3. and what the comments section from that blog has to say.
  4. Gun control, the Japanese way.
  5. To circle back to the beginning, a contemplative article from Vox.

Etc: Links for 21st June, 2019

  1. “We are doomed not because we have damaged the environment, not becasue we are running out of water; not because we have run up too much debt; not because we have accumulated too much wealth in too few hands but because we know not and refuse to admit we know not.”
    In other words, our refusal to acknowledge the unknown unknowns. The link within the article is worth a link in its own right, but that apart, this article is worth reading because of the author’s horror at how little we know, and how little we care about how little we know.
  2. “Let’s look at the numbers, shall we? The author has written 179 books, which have been translated into 43 languages. Twenty-two of them have been adapted for television, and two of those adaptations have received Golden Globe nominations. Steel releases seven new novels a year—her latest, Blessing in Disguise, is out this week—and she’s at work on five to six new titles at all times. In 1989 Steel was listed in the Guinness Book of World Records for having a book on the New York Times best-seller list for the most consecutive weeks of any author—381, to be exact. To pull it off, she works 20 to 22 hours a day. (A couple times a month, when she feels the crunch, she spends a full 24 hours at her desk.)”
    A staggering read, for many reasons. Tyler Cowen often asks guests on his podcasts about their “production function”. Danielle Steele’s production function is positively scary. Honestly, I envy people who can willingly work so hard because they want to.
  3. “Since then, liver cells, heart cells, lung cells — in the words of Charles Weitz, “just about every tissue we’ve looked at” — have turned out to beat their own time, in addition to taking cues from the suprachiasmatic nucleus. “Almost every cell in our body has a circadian clock,” said Satchin Panda, a clock researcher at the Salk Institute. “It helps every cell figure out when to use energy, when to rest, when to repair DNA, or to replicate DNA.” Even hair cells, for instance, divide at a particular time each evening, Panda has found. Give cancer patients radiation therapy in the evening rather than in the morning and they might lose less hair.”
    A fascinating article on the many, many clocks in our body – and why some parts of our bodies seem to not have these clocks – with disastrous consequences.
  4. “The key signal that tornadoes were coming in the US is a phenomenon known as the Madden-Julian oscillation. Similar to El Niño, it’s a periodic swing in temperature and moisture. But unlike El Niño, the MJO originates over the Indian Ocean rather than the Pacific Ocean, it varies on a week-to-week scale rather than over the course of years, and the pattern moves eastward rather than staying put.”
    An article that helps us understand the weather a bit better – but if anything, I think it tells us how little we know about the weather! This one is about why the USA saw so many tornadoes recently.
  5. “My guess is that writers could contribute more at the margin by blogging than by composing books. But perhaps blogging is a more difficult skill.”
    I had linked a while ago to a lovely essay by Andy Matuschak about books – Arnold Kling reviews that essay, and gives us his thoughts about books, blogs and podcasts – and also about scarcity, opportunity costs and substitutes.

ROW: Links for 19th June, 2019

This week, here’s a selection of five articles that help you understand issues in America a little bit better.


  1. “The old consensus that the US needed to help address the “root causes” of migration, by investing in the Northern Triangle countries and making it more appealing for people to stay, was never supposed to be an immediate solution to anything. Of course, Trump’s view of migration makes it less likely that anyone will be able to start work on long-term solutions that might bear fruit down the road. It is almost certainly, in the meantime, going to get worse before it gets better.”
    Vox gives us a clearer picture on the migration crisis at the southern US border. Yes it is bad, yes, there is a crisis, and yes, it likely will get much worse before it gets a little better, for a variety of reasons. All of which are explained in this piece.
  2. “Of course, if it hadn’t been for Roe, there also wouldn’t have been more than 50 million abortions since 1973; whether that’s a good or bad thing will be left as an exercise for the reader. But many abortions would have been performed anyway, because before the court took the issue away from voters, polls showed public opinion steadily trending in favor of legalized abortion, and the procedure was already legal in several states.”
    Are you familiar with Roe v Wade? If you aren’t, read up about it first. Then read up about what Alabama is up to today. And finally read this article. And also consider following Megan McArdle (the author of this piece)
  3. “Rather, regardless of what any deal achieves, the two nations appear to have entered a protracted era of competing for technological advantage, in areas ranging from aerospace and telecommunications to artificial intelligence, all with big military as well as commercial implications. Managing tensions over the issue is an increasingly important part of the U.S.-China relationship, for both sides.”
    The Christian Science Monitor on what the trade war, or the new cold war (or whatever else it is that you want to call it) really is all about.
  4. “This resonates with my own view. A large, established enterprise can be thought of as a cultural institution, with particular rules, norms, systems, processes, and institutional knowledge ingrained throughout the firm. In a stable environment, this corporate culture is a valuable asset. But as the business environment evolves, a firm’s culture can inhibit its ability to adapt. Cultural assets can depreciate, and one of the most difficult tasks for top management is to know when and how to replace elements of a culture that otherwise had served to keep the enterprise sturdy and reliable.”
    Arnold Kling reviews a book that has appeared on these pages before, but the reason I put this article up here is because it helps you understand an important point about America today: it’s reviling of the corporate culture is very real – and Tyler Cowen says perhaps misplaced. Useful to think about how one should think about what made America great, and how perhaps it is changing – for the better or otherwise is your opinion entirely.
  5. “Before I left, I asked the black waiter, Darick Thomas, how he felt about my hat. “I don’t care. At all. Really. At all! I look at a hat and that doesn’t tell me who the person is,” he said. “I’m not against Trump. He says some smart things; he says some dumb things.” Darick didn’t vote. “Voting is the illusion of choice for the masses,” he explained.”
    What happens if you were a MAGA hat in a famously liberal restaurant in LA? This is, of course, at best an anecdote – but an enjoyable one, nonetheless.