“The Barter Theater first opened its doors in June 10, 1933, providing relief and diversions for Depression-era audiences.  It was founded by Robert Porterfield, a young actor who suggested that audiences barter homegrown produce for admission.  Its motto was “With vegetables you cannot sell, you can buy a good laugh.”  Crowds were receptive to the idea of ‘ham or Hamlet,” and an estimated 80 percent of the audiences paid with fruits, vegetables, and livestock, or dairy products.”  [1]

I’m surprised I’d not recognized that bubbles of the business cycle has numerious analogies to a mast year [1,2].  Which has got me to wondering if there are cases where an industry might strive to synchronize the equivalent of a mast year so as to disrupt the populations adjacent to them in the supply chain.  No doubt it happens by mistake, but intentionally?

Here’s an interesting cognitive science puzzle.

Seth is seeking a cognitive task which he can use to test how his brain is working.  He want’s something quick, something he can self administer.  But this is the part I find particularly thought provoking, he want’s something that the brain won’t learn how to get better at.

This is like one of those cryptographic puzzles.  He needs a puzzle generating black box.  The class of puzzles mustn’t be too hard and they need to have difficulty metric delivered with htem.  But, no matter how many of these puzzles the brain solves, it should never manage to learn anything about the class of puzzles the black box spits out.

I wonder if there is something deep there?

They can only sell fruits and vegetables at Boston’s Haymarket and there is a guy who wanders around and fines the occasional vendor who tries to put on something else.  I’ve seen people try to sell batteries, olive oil, cleaning products.  Around the corner from
Haymarket are the remains of the old fish market and one maybe two vendors occasionally show up there; selling only fish.  The stores the line the sidewalk adjacent to Haymarket are mostly meat markets.  They aren’t as tightly regulated and they put on a larger variety of goods.  No doubt you could write a whole book about history of the negotiation between all these vendors and their landlords, e.g. the market owners.

The homogeneity of the vegetable market is an interesting contrast to the shopping mall where the landlord, it seems, strives to maximize the heterogeneous diversity of the tenants.  No doubt the tenants prefer the absence of competition and I assume their leases spell that out explicitly.

I don’t doubt that the vegetable vendors prefer that Haymarket’s regulator stamps out the occasional attempt to change the rules of the game.  The homogeneity creates externalities that the can be observed at larger scale in other geographic concentrations.
Which is why the stifling nature of zoning laws tends to be pretty uncontroversial.  No doubt the folks who live in NYC’s fabric district are peeved when some innovator decides to open a clothing store.

It is a mystery to me why there are so few commercial malls with a homogenous rather than a heterogeneous collection of stores.  Of course there are examples.  Tourist trap malls that sell nothing but trashy collectibles.  Antique furniture malls, that seem take over failed malls.  And of course mall landlords to work to achieve some kind of homogeneity; filling their space with vendors whom will all appeal to the same demographic.  So maybe some of the mystery can be resolved by saying that the homogeneity is on either the buyer side, or the seller side.  Maybe you can’t get high producer homogeneity until you achieve a sufficient population density.

Nice example of how tit-for-tat is often exactly the wrong approach.

It’s a curious saying, “Render unto Caesar.”  Advice to the oppressed, give it up, accept what you can not change.  Don’t organize a resistance.  Don’t fight back.  Cave.  No matter that he’s evil, illegitimate, foreign, and couldn’t careless about your culture.  Of course in context the entire quote is about surrender “…and unto God the things that are God’s” so it is really pretty consistently in the give it up and submit school of philosophy.

But there are times when it’s probably good advise: fighting city hall, gravity, death and taxes, etc.

I’ve spent a lot of calories over the years declining to submit to Microsoft’s monopoly.  Even had some success in doing so.  But rolling the clock back I’m comfortable that I didn’t expend too much effort evangelizing that other people decline to submit to that Caesar.

That’s all water under the bridge, more or less, but this issue arises again and again.  A dominate commercial monopoly exercises their power in offensive evil ways and the choice arises, submit or sign-up for the extremely abrasive alternative of fighting or shunning the network?

What brings this all to mind?  Today’s example – Facebook v.s. Google

“People wondered if they’d have to have extra children to make room for all the stories.” — Terry Pratchett in The Amazing Maurice and His Educated Rodents

The economic profession has some serious soul searching to do.  They blew it, not a little, but a lot.  For the last decade they ought to have all over the risking tide of risks in the economy.  But rather than do that work they were cheerleading the move to increasing  volatility  and risk.  They did that not in a sober and professional way, but rather they fell  victim  to all the standard failure modes of  professionals:  arrogance, pride, chauvinism, provincialism.

No doubt Shiller is right when at the  beginning of this talk he mentions  Jarvis’s  Groupthink.  But he moves on.  Jarvis is pretty clear about how groups fail via groupthink.  It’s not pretty.  It is certainly not an excuse.  The last time I sighted groupthink being used as diagnosis it was to explain how the Bush administration got us into Iraq.  As I wrote then “This framework is just what the doc ordered. It offers the people writing the report a chance to avoid blaming anybody.”

People talk about the need for something along the lines of a “truth and reconciliation” process to help air up dirty laundry of the last eight years.  That’s work which we as a nation ought to do.  Not for revenge, but to  cleanse, but to help eliminate the root causes.  That’s why the Republican establishment in particular ought to be desperate to do that work.

This situation re. the economic profession is, seems to me, more serious.  We have no means to vote the profession out of office!  We are stuck turning to that very same of arrogant smarty pants to try and puzzle out what to do.  Jarvis has a list of what appears to cause the fiascos that go under the name Groupthink.  It’s in that posting I did about the Iraq use case.  But notable in that list is “unquestioned belief in the the group’s inherent morality.”  Economists need to get over themselves.  They need to understand that at this point a significant portion of the  responsibility  for every foreclosure, every layoff, every hungry child lies at their feet.  Humble pie’s on the menu, but will they heed the dinner bell?

I bet it really gets their goat, pulls their chain, and makes them cranky.  I mean here it is, nine paragraphs in: “validated by an unrelated study indicating that the data collected by Yahoo, Google’s main rival in Internet search, can also help with early detection of the flu”, and then in the next paragraph “”In theory, we could use this stream of information to learn about other disease trends as well,” said Dr. Philip M. Polgreen, assistant professor of medicine and epidemiology at the University of Iowa and an author of the study based on Yahoo’s data.”

The New York Times article, presumably with the help of the Google PR people, is misleading.  No doubt the folks at Google who did this work are embaressed at this as it’s an offensive to professional norms.  The credit for this should go to the folks at the University of Iowa who with the help of folks at Harvard and Yahoo’s research group in New York did the original work. That’s published here.  “Using Internet Searches for Influenza Surveillance”  Philip  M.  Polgreen, Yiling  Chen, David  M.  Pennock, and Forrest  D.  Nelson.  People did that work.  Not Google, not Yahoo.

All that is an omission from the so called paper of record about the actual record but it’s not the omission I find most interesting.  What I find interesting is the “what’s next.”    It’s notable how, if your search Dr. Polgreen at Google you now get almost entirely links to the PR ripple from the NY Time’s article.  No doubt he finds that a bit irratting, maybe even depression.  So then what?

Ok, now that’s not tacky, that is practically criminal and it’s certainly autistic.  If somebody asks you about “suicide methods” you do not reply with an enumeration of same, along with a second link to a site that featuring “staggering” “adult content and images” of “hash reality.”  Can you imagine if the local librarian did that?  What you do do is you attempt to intervene.

Let’s step back from that colorful and exaggerated example. Let’s spend just a few seconds thinking about what Google might do with this technology.  Yeah!  They could place some Ads!  Why doesn’t that though get covered in the article?  I suspect it’s because they didn’t spend those few seconds.  That is pretty  sloppy.

But a few more minutes and they would get to the much more interesting question, could the search engine in intervene!  Could that intervention save lives?  I think the answer is obviously yes it could and yes it would.  Google doesn’t even attempt to do that on their flu tracking page.

It’s an interesting puzzle to what degree search engine results should be tuned to be more appropriate.  As the exagerated example above highlights, machine results are not necessarilly what any reasonably human would do.  I very much doubt that any librarian would respond to a question about sucide methods or flu symptoms as google does.  No reasonable scientific reseacher would claim that Google invented this technique.  Given that, something is clearly broken and needs fixed.

John Hempton over at Bronte Capital makes an interesting point about diversification.  I’d not fully appreciated this.  The textbook story about diversification is that can smooth out your risks (good and bad) by loading up on investments that are uncorrelated with each other.

If you take the lesson of diversification to heart it leads to a lack of  loyalty.  It encourages alienation even from your own skills.  John points out there are a few citizens of Iceland who are very happy because had 20% of their wealth invested overseas.  All the more loyal citizens aren’t so happy.    You certainly should never let a significant portion of your wealth be invested in your employer, since if they collapse would would lose both your job and your wealth.  In fact you should probably not be invested in the industry your professionally expert on.

Since most well educated people know about diversification you can make jokes that play off how it encourages disloyalty and alienation.  e.g. “Nice kids!”, “Thanks.  It’s not so hard.  You just have a few dozen and throw away the discard ones.”  What I additionally love about that joke is how it presumes that your kids are competitive rather than complementary (illustrated here, (note the there == happy).  There is something quite meta about the recent crisis of faith among those who placed their faith in diversification.

The search for ways to diversify leads to investment mavins to collects lots of data so their statisticians can discover what is and what isn’t correlated.  Which is, of course, only as good as your data and your statistical model.

What John points out is that much of the risk (good and bad) in a portfolio comes from the black swans.  Which is an entirely different way of looking the problem of how to diversify.  You should not be so interested in the steady bits.  It’s all about the surprises.  Apple, Iceland, Microsoft, biology, politics and your relatives are full of surprises – different kinds of surprises.  A well diversified portfolio should be surprising and fundamentally disconcerting.  First you need to admit that your portfolio is all about the swans, and then you want to assure they are not color coordinated.  You may not know what your “unknown unknowns” are, but at least you want them to be different.