Archive for August, 2007

Increase your necessity, so that you may increase your perception

August 21, 2007

Necessity is the mother of invention.

It is the ability to heighten necessity that empowers invention.

“New organs of perception come into being as a result of necessity.  Therefore, O man, increase your necessity, so that you may increase your perception.” [Sufi sage Julaluddin Rumi (1207-1273)]

— from The Tale of the Scale by Solly Angel

What economic incentive is there to form decentralized organizations?

August 20, 2007

Adam Smith wrote a seminal book in 1776 called The Wealth of Nations. It is a classic, laying the foundations for most of today’s economic ideas. Smith’s ideas are deeply ingrained into western societies.

Division of labor is central to Smith’s thesis. Division of labor leads to high productivity. By focusing one’s efforts on a single task, one develops a talent for that task and become very productive. The greater the productivity, the greater one’s wealth.

Division of labor is consistent with one’s self-interest.

Conversely, when a person attempts to perform many tasks he masters none, is inefficient, has low productivity, and is unable to attain wealth. This is not consistent with one’s self-interest.

Division of labor results in a society that does lots of trading (if a person produces only one thing, he must trade for the other things he desires or needs). This creates a highly interconnected, interdependent society.

Today there is much excitement about decentralization. In a decentralized organization there is no one in charge, everyone is independent.

“Units of a decentralized organization are by definition completely autonomous … In decentralized organizations, anyone can do anything … Any and every activity is within anyone’s job description.” [1]

In a decentralized organization each person is not focused on a single task; rather, each person is a jack-of-all-trades. Smith would argue that this leads to low productivity, which leads to low wealth, which is not consistent with one’s self-interest.

So I wonder: what economic incentive is there to form decentralized organizations?

[1] The Starfish and the Spider by Ori Brafman and Rod A. Beckstrom

Increasing specks of jelly in the peanut butter shows the arrow of time

August 19, 2007

Suppose you watch two time-lapse video clips. In the first video clip you see progressively more and more specks of jelly in the peanut butter. In the second clip you see less and less specks of jelly in the peanut butter.

Which video clip shows forward direction of time? Which shows time in reverse?

Answer: the first video clip shows forward direction of time.

Initially the jelly and peanut butter were separate, i.e. “ordered”. Over time, as the children make peanut butter and jelly sandwiches more and more specks of jelly get into the peanut butter and there is a greater degree of mixing of the two, i.e. it becomes more “disordered”.

There is a general trend in our world toward increasing disorder, e.g. cars rust, buildings crumble, mountains erode, apples rot, and cream poured into coffee dissipates until it is evenly mixed.

In fact, scientists have created a “law” that states that the disorder of the whole universe is increasing. Over time, all order, structure, and pattern in the universe breaks down, decays and dissipates – the ultimate end point of the universe is a random, featureless, homogenized murkiness. It is this increasing disorder that gives time its arrow, e.g. it is the increasing disorder of the peanut butter which enabled you to know which video clip shows the forward direction of time.

Scientists call this disorder “entropy”, and the law which states that the universe becomes increasingly disordered is called The Second Law of Thermodynamics.

— Extracted from The Origin of Wealth by Eric D. Beinhocker

Is there more information in a rock than in the human genetic DNA code?

August 18, 2007

How much information is in here:

  • It is a fine day.

Let’s measure the information by the number of characters. There are 17 characters, so the amount of information is 17.

How much information is in here:

  • It is a fine day. It is a fine day. It is a fine day. It is a fine day. It is a fine day.

The same sentence is repeated five times. Is the amount of information 17 x 5 = 85? Answer: No. The extra four sentences don’t say anything new. The information that is present is this:

  • Repeat 5 times: It is a fine day.

The number of characters in this is: 33

How much information is in here:

  • 3.1415 …

This is the value of pi. Suppose one million digits are displayed. None of the digits repeat, so you might be tempted to say that the amount of information is one million. Not so. The information can be represented succinctly as:

  • Pi to one million digits

Now the amount of information is just 24.

How much information is in here:

  • dkdl;eekrkpeosfdlzdmc;dsfkdopkfospkfs;dlkflas;krwe0q0–03ospaaj

This is just a random sequence of 63 characters. If any random characters will do, then the information can be represented simply as:

  • Random sequence of 63 characters

There are 33 characters.

Something is “information” if it is meaningful, non-random, and unpredictable [1].

How much information is in a rock? If we were to characterize all the properties (location, angular momentum, spin, velocity, and so on) of every atom in the rock, we would have a vast amount of information. A one-kilogram rock has 100000000000000000000000000000 (29 zeros) atoms. That’s one hundred million billion times more information than the genetic code of a human race. But for most common purposes, the bulk of this information is largely random and of little consequence. So we characterize the rock for most purposes with far less information just by specifying its shape, location, and the type of material of which it is made. Thus, it is reasonable to consider the information of an ordinary rock to be far less than that of a human even though the rock theoretically contains vast amounts of information.

[1] If you know what’s going to be said (i.e. it’s predictable) then it’s not information.

– – Extracted from The Singularity is Near by Ray Kurzweil

If you know that you are not sure, you have a chance to improve the situation

August 17, 2007

“All scientific knowledge is uncertain”

“It is necessary and true that all of the things we say in science, all of the conclusions, are uncertain, because they are only conclusions.  They are guesses as to what is going to happen, and you cannot know what will happen, because you have not made the most complete experiments.”

“So what we call scientific knowledge today is a body of statements of varying degrees of certainty.   Some of them are most unsure; some of them are nearly sure; but none is absolutely certain.  Scientists are used to this.  We know that it is consistent to be able to live and not know.”

“If you know that you are not sure, you have a chance to improve the situation.”

The Meaning of it All by Richard Feynman

“Breathe in to protect the back”

August 16, 2007

Years ago I learned a valuable lesson from a weightlifting instructor. I was doing an exercise called Squats. This exercise involves putting a weighted bar on the shoulders, descending and then ascending. The instructor told me: “When you descend breathe in deeply, expand your abdomen, hold your breathe, and keep your ribs tight.” He went on to explain that this breathing technique results in pushing the diaphragm outward, thus securing the back and entire midsection.

This breathing technique has helped tremendously over the years to protect my back. I use it not just when I exercise, but any time I have something heavy to lift around the house. Prior to learning this breathing technique I used to injure my back frequently. Now I rarely have any problems. Of course, I also do stretching and warm up properly.

Similarity is not Sameness … Dangers of Misused Metaphors

August 15, 2007

“Human beings are skilled pattern recognizers and use metaphors to help them understand and reason about the world. Saying that something resembles or has qualities of something else enables us to quickly, and in just a few words, grasp the essence of a complex phenomena. Shakespeare could have given us a long passage about how Juliet was central to Romeo’s life, brought him happiness, and so on. Instead, with the simple phrase “Juliet is the sun!” Shakespeare conveyed those meanings in a far richer and more powerful way.

Science uses metaphor as well, both to inspire creativity and to help communicate complex ideas. For example, the metaphor of tiny, vibrating loops of string has helped inspire the physicists who are developing string theory (an attempt to unify the fundamental forces of the universe and explain the origins of subatomic particles) to think in radically different ways from their predecessors. Likewise, the phrase loops of string helps metaphorically communicate the key ideas of string theory to a lay audience more easily than does “eleven-dimensional Calabi-Yau space.”

But while the metaphor is useful in inspiring and communicating science, science itself is based on more than metaphor. Scientific theories do not merely make claims that one thing resembles another. Scientists make claims that something literally is a member of a universal class of phenomena.

Similarity is not sameness. When a cosmologist says our sun is a star, the scientist doesn’t just mean it is similar in some way to a star. Rather, our sun is a member of a universal class of phenomena, which are called stars, which share certain empirically observable characteristics.

When you see a similarity of one idea to another you may be inspired to use the tools and techniques from one field in another. Danger! Is the similarity a metaphor or science? That is, does the one idea genuinely share the same properties as the other, or is there merely a superficial similarity? If there is merely a superficial similarity but you treat it as the same then you are headed for erroneous results.

Example: in the nineteenth century was an economist by the name of Walras. He was eager to put economics on a mathematical basis. He observed the physicists and noted that they had created mathematical equations to describe equilibrium in nature. He thought, “Hmm, we have a similar situation in economics: prices seem to converge to equilibrium, supply and demand seem to converge to equilibrium.” So Walras hijacked the mathematical equations from the physicists and applied them to economics. The problem is with the word “similar”, i.e. “we have a similar situation …” He mistook a metaphor for science. Prices converge to something that approximates equilibrium, but doesn’t really attain equilibrium. Supply and demand converge to something that approximates equilibrium, but doesn’t really attain equilibrium. The consequence of Walras mistaking metaphor for science is that he placed the whole field of economics on a wrong footing.

— Extracted from The Origin of Wealth by Eric D. Beinhocker

The Most Persistent of all Economic Delusions is the Belief that Machines Create Unemployment

August 14, 2007

“Among the most persistent of all economic delusions is the belief that machines on net balance create unemployment.

The belief that machines cause unemployment leads to preposterous conclusions. Every technological improvement must cause unemployment. The logical conclusion would be that the way to maximize jobs is to make all labor as inefficient and unproductive as possible.

Let us see exactly what happens when technological and labor-saving machinery is introduced.

Example: a clothing manufacturer learns of a machine that will make men’s and women’s overcoats for half as much labor as previously. He installs the machines and drops half his labor force.

This looks at first glance like a clear loss of employment. But the machine itself required labor to make it; so here, as one offset, are jobs that would not otherwise have existed.

It is likely the labor employed to build the machines is less than the labor cut by the manufacturer. So there is still a net loss of employment to be accounted for.

The machine was a large investment, so it takes several years for the machine to pay for itself. After the machine has produced economies sufficient to offset its cost, the clothing manufacturer has more profits than before.

The manufacturer must use these extra profits in at least one of three ways:

  1. He will use the extra profits to expand his operations by buying more machines to make more overcoats; or
  2. He will invest the extra profits in some other industry; or
  3. He will spend the extra profits on buying things for himself, e.g. buy a new house or a new car.

Whichever of these three courses he takes, he will increase employment.

The manufacturer, as a result of improved production has profits that he did not have before. Every dollar of the amount he has saved in direct wages to former overcoat-makers, he now is able to pay out in indirect wages to the makers of the new machines, or workers in another industry, or to the makers of a new house or car. In any case, he gives indirectly as many jobs as he ceased to give directly.

But the matter does not rest at this stage. The manufacturer competes with others. Due to competition the price of overcoats drops. The savings are passed along to the consumers. The consumers now have more money to spend on other things, which results in more employment.

In brief, on net balance machines, technological improvements, automation, economies and efficiency do not throw men out of work.

The central lesson is that we should try to see all the consequences of any economic policy – the immediate effects on special groups, and the long-run effects on all groups.”

Economics in One Lesson by Henry Hazlitt

P.S. It is fascinating to see how interconnected things are, how a change has an effect that ripples outward to things that you cannot anticipate, i.e. unanticipated consequences.

The law of supply and demand isn’t a law!

August 13, 2007

“One of the oldest principles of Traditional Economics is the law of supply and demand.  A basic prediction of this ‘law’ is that the counterbalancing forces of supply and demand will drive a market to an equilibrium price and quantity level.”

“For example, if a car company introduces a new model that suddenly becomes popular, the company will typically raise the price while demand exceeds supply, expand production, and then lower the price once demand has cooled off and supply has caught up.”  (Lesson learned: don’t buy something when it first comes out; wait a few months and you can get it at a lower price)

“If, however, we zoom into a more fine-grained level, we see that real-world markets are almost never at equilibrium, supply rarely equals demand, and markets rarely come into balance.  In fact, virtually all markets are built around the assumption of disequilibrium rather than equilibrium.  Most markets have stocks of inventory and order backlogs.”

“Your local car dealer has a parking lot full of vehicles that are slower selling and an order backlog of ‘hot’ vehicles that customers are waiting for.”

“The law of supply and demand isn’t a law after all (at least not in any scientific sense); rather, it is more appropriately the rough approximation of supply and demand.”

— The Origin of Wealth by Eric D. Beinhocker

Influencing a System by Finding its “Levers”

August 12, 2007

In the field of Complex Adaptive Systems (CAS) people talk about “finding levers” to influence a system [1].  This idea of a “lever” in a system has always puzzled me.  Now I understand!  What follows is an example.

Consider a road, say Route 3, which runs between New Hampshire and Boston.  The road is a “resource”.  Further, it is a limited resource – it cannot hold an unlimited number of cars.  During rush hour lots of people use the road, and travel can be quite slow.  What we have is a failure of individuals to cooperate on the use of this resource.

Route 3, the surrounding roads between New Hampshire and Boston, the cars, the buses, the trucks, and all the drivers collectively comprise a “complex system”. The system doesn’t work very well – during peak hours there’s lots of congestion  on Route 3, with little traffic on surrounding roads or during off-peak hours.

It would be useful to find a “lever” that could be applied to get people to cooperate better and thus have a smarter system.  Specifically, we want people to use other roads and stagger the times they drive on Route 3.  What lever that can be applied to this complex system?

Answer: charge a toll to use the road during peak hours. A toll will make the cost of using the resource obvious, and will force individuals to ask themselves, “Does the benefit outweigh the cost?”  Some people will answer “No” and use alternate routes or drive at non-peak hours.  Congestion is reduced on Route 3.  By introducing a toll we are influencing the system.  The toll is a lever.

A toll is a lever that helps eliminate traffic jams that result from pure congestion.  Other levers are needed to deal with road problems that are not due to pure congestion, problems such as accidents, construction, sun blindness, or a slow-moving truck in the right lane.

Can you give examples of other levers?

[1] We do not attempt to “control” the system; rather, we just “influence” the system.  Complex systems are typically not controllable.