Tag Archives: Economics

Relative Probabilities and Why the World Is Incapable of Second Level Analysis

Politics, , ,

Yeah, the title sounds a bit complicated but it’s not. The premise is simple: People are capable of simple logic, but whenever it comes to the leap level of complication concerning logic, most people tend to fail, leaving most issues bogged down in simplistic thinking, and stupid generalizations. Think about it. How many times have you heard the start of a great argument on a subject you already know a lot about through daily exposure, like something new on immigration, but then before that new perspective can be explored, the argument gets bogged down in the old arguments with no attempt to look at the issue from the new direction? I know it happens to me all of the time. Years ago, I was watching a debate take place between two really good university debate teams from the USA and Ireland. The issue just so happened to be about immigration, and the US team looked like they were going to win by default alone (I mean, who knows more about immigration in the US than people from the US?), but then out of nowhere, the Irish team took a completely different perspective and pretty much wiped out the US team by analyzing the subject from a contributive perspective (how much immigration actually improves the economy rather than bogs it down), and it was obvious that the US team had never even considered such possibilities. In the end, after the debate (there was no real “they won” narrative after it as it was a friendly debate), one American student who was watching said: “Yeah, they had a good argument, but immigration is still bad. It takes away our jobs.”

Yes, a long story to get to the point that sometimes people just aren’t capable of handling a higher level construction of a conversation. In the end, people tend to bring things back to what they already know, so that newer breakthroughs of knowledge of rare, and quite unlikely to be achieved.

But let’s look at it from the simple method of probability. In the very beginning of the study of math, once you got past algebra. Um, we did all get past algebra, right? I hope so because there’s going to be a quiz after. Make sure you get out a pencil and some scratch paper….

Say you have a coin and decide to flip it. What are the possible outcomes? Heads or tails, right? So your probability is 50/50, or you have a 50 percent chance of achieving a head or tail on the flip of the coin. That’s pretty simple. The next step in cognitive probabilities is to use two coins. What are the outcomes with two coins, and what is the percentage chance of getting a heads twice?

The math: 1/2 x 1/2 = 1/4. Basically, the formula is pretty simple. You use the original probability of 1/2 and then factor it by whatever number of coin throws you intend to do. So, 3 coins would be 1/2 x 1/2 x 1/2 = 1/8. But here’s where it falls apart. If you know that your odds of getting 3 heads in a row are 1/8, and you throw the first two coins and get a head, what is the chance of getting a heads on the third throw? The mathematician will say 1/2, because that would be right, but depending upon someone’s faith, belief in karma, desire for justice and whatever, that last prediction can be quite interesting. If you went by math, you’d know your answer. But I tried an experiment where I told people I was flipping a coin, and asked them what were the odds I’d get a heads. Most answered 50 percent. But then I said that I had flipped that coin twice alredy and got a heads each time. So I asked them what was the percentage chance of a heads on the “third” try. Surprisingly, quite a few of them thought about it a bit and while some of them said 50 percent, there were a few who said that it was “bound to happen” that I’d end up with a tails on the third try, so they answered with different statistics and guesses. It was almost as if there was a belief that the next throw of the coin would end with a result that was necessary rather than logical.

It is this thinking that I am referring to today when I talk about second level analysis. Most people are capable of thinking of that first coin toss, but after the logic wears off, these same people start to think with other motivations, specifically faith and belief. I’m not talking about religion here, although it can go that way, but an inate tendency to push towards a sense of justice in the universe, so that if logic dictates a coin has a 50 percent chance of going on way or another, eventually it has to correct itself if it has been drawing too many heads. There is no logic to this, but there are people who believe this because it just seems like it SHOULD be that way. This isn’t belief in a higher being but in the basics of probabilities that people tend to believe right themselves after time.

Now, let’s bring this back to arguments of a higher level. Because people believe in these intrinsic values of logic, it becomes that much harder to argue towards a philosophical understanding of complex issues. The more math involved in the decision-making, and quite often logic involves a geometric processing of common sense (using proofs and situational constructs), the less likely someone is going to be willnig to change ones original foundation of thinking. I’ll demonstrate using a common argument that comes up in pretty much any nation, the burning of the country’s flag.

There are those who believe that it is sacrilegious to burn the flag, that is means complete disrespect for one’s country. Yet, at one point during the protests of the Gulf War, a group of former combat veterans burned the US flag to point out that they were part of a country so free that it could burn its own flag. This caused all sorts of right-wing commentators to condemn these veterans as traitors to the country, being completely incapable of seeing that there was a higher level argument being made here. In the end, very few people changed their minds over the issue. Today, if someone talks about burning a flag, there’s a good chance that person is going to be considered an enigma to the country, and in some cases there has been talk of charging such persons with a crime. The enlightened protests of such veterans meant little when it came to discerning higher level analysis over complex issues.

Which brings me to a couple of comments that I think are important to make. If most people are not capable of handling higher level analysis, we are in a bit of trouble when it comes to solving a lot of current problems, including the current economic state of affairs in the world. The solutions to our economic problems require higher level analysis and complex solutions, but unfortunately, the people who put forth such ideas are limited to having to explain such processes to people who are easily influenced by tactical politicians who are interested in immediate goals, not long term stabilization and growth. So, until people actually start explaining complex issues in a way that most people can understand, WITH THE NECESSARY PATIENCE, we’re going to have serious problems in the future, unless we can come up with simple answers to very complex problems.

Is Ownership an Illusion?

Politics,

Every now and then, a new article on Second Life will pop up, and people will start arguing about whether or not intellectual “property” is, in fact, property. What the argument means is that there are people who own virtual land in games, and they argue that they “own” that land in the real world. Linden Lab, the company that owns Second Life, recently changed its user agreement to indicate that they own their property and that the players only get to use it as Linden Lab allows it. Well, in case you don’t know this, people have spent thousands of dollars buying property in that land and developing it. For them, they’re somewhat pissed. But it’s a show down that is now going to the court systems of the real world in the United States (California, actually, as Linden Lab is located in San Francisco, California). The court system, however, has been very apprehensive about taking cases of this nature, because in case you don’t realize it, a decision on this issue would be one of great magnitude and importance, and no one wants to be the precedent for this sort of litigation.

But you’re probably wondering, who cares? You don’t play Second Life, and chances are you probably don’t play anything else, like World of Warcraft to really care any way. Well, neither do I, but I do find the issue to be one great importance because it is touching on an issue that is very dear to me, and that’s the idea of ownership in general.

You see, I’ve been convinced for a long time now that ownership is really an illusion, something we convince ourselves of being tangible, only because we’ve convinced enough of our neighbors to buy into the fantasy. It’s partly why I’ve never looked at property as an investment. I’ve never bought into the whole idea that it’s actually mine. It’s kind of hard to think that way when the property you’ve bought is subject to taxation by the government that automatically indicates that the property actually belongs to the government and I’m just living on it. I mean, if it was MY property, then no one should be able to benefit from my ownership. It should be mine, straight out.

But it’s not. The government claims that it is authorized to charge me money if I happen to own a bit of property in ITS jurisdiction. If I don’t pay them, they can forcibly take that property from me and give it to someone else. Also, if the government decides it wants to build a tea garden where I happen to have built a gazebo, they can just take it and offer me whatever THEY decide they want to offer me for it. There’s a whole amendment to our Constitution that pretty much says they’re not supposed to do that, but when it comes to government following its own laws, well there’s an exception to everything. When it benefits them, it’s an exception. When it benefits me, it’s a breach of law.

This is a problem that goes way back to before our country was even founded. Kings used to think that they owned all of the territory and that the peasants were just there to work the king’s land. We’re not that far off from where we used to be, even though we took the Lockeian direction and claimed that land we own is now something that belongs to the people and individuals. But it doesn’t. Nothing is really ours as long as someone with more power wants it. If someone with economic power wants your land, he or she attempts to buy it. If that doesn’t work, he or she then attempts to take that land through legal maneuvers, like suing you for some “crime” that you have done to that individual, like growing your weeds too far over a fence or something equally ludicrous. If that doesn’t work, then quite often a business will turn to government to declare your land a public land grab and then take it that way. It happened in San Francisco when I was living there. The government took land that was owned by individuals because they wanted to develop it for “the poor”. When they completed their land grab, businesses lobbied government for it and then took ownership of the same property for private development. The people who complained were pretty much told to shut up, first by loud mouth private interests and then by baton-carrying police officers. Well, the same thing happens all over the country, and whenever you hear of government planning to “clean up” an area, expect a land grab to happen soon after as the richest elements of that society then profit off of the misery of those who were told to move off their previously owned land to make way for “progress”.

What is interesting about this whole thing is that with the collapse of the housing industry, the illusion is a lot more present than it has ever been before. There is currently a huge land grab taking place all across this country, as the rich are now buying up the land that had to be cast aside by those who could no longer afford to make their payments that were too much for them to pay in the first place. It was all a house of cards waiting to fall, and someone removed the queen of spades from the bottom of the deck, and rather than have the whole thing collapse, the whole house is teetering now, just waiting to cave in on itself. Yeah, so much for an overused metaphor….

In the very near future, we should see a lot of interesting tales as the reality of what has taken place starts to make its way into the public realm. A lot of this was able to continue as long as no one ever questioned how it could keep maintaining itself, but the era of manifest destiny has been over for a very long time. There are no more trails to travel with lots of land as far as the eye can see. We reached the ocean, and ever since then there’s been the realization that expansion is over; consolidation is never as much fun or as opportunistic for all involved. Now that we’ve turned back inward on what we passed on the journey to reach the water, we’re left with the realization that there’s nowhere else for us to go, and all that is left is what we have already seen. Mix that in with the reality that ownership of land is just an illusion, and there’s a very interesting powder keg preparing itself for something. What that something is might be much more interesting as it begins to reveal itself in our future.

Reflections on Life in General

Politics, Religion, , ,

I spent a few hours this weekend paying bills. You know, the usual, where you sit down with your check book and write out checks for all of the bills that have been building up over the last few weeks. The kind that build up not because you can’t afford to pay them, but just because you don’t want to take the time to pay them. I find myself doing that a lot, and have even paid some bills really late because I just didn’t feel like filling out the paper work that is required to fill out in order to pay a simple gas bill. I really hate  paying bills, and no matter how many times I pay it, that feeling just doesn’t change.

For me, it feels like my life has very little meaning when it comes down to it, because when I’m sitting there with a handful of utility and credit card bills, one starts to feel that there’s really little purpose in life other than paying bills to people who don’t provide anything for me other than little nuances that one needs to endure in order to live somewhat comfortably. I pay a gas bill because I don’t want to freeze, and sometimes I like to cook food without having to rub two sticks together and hope that millions of years of evolution don’t put me back a couple of thousands years to where I’m still required to provide my own fire. I pay an electricity bill so that I can watch TV, turn on the lights, run the microwave (avoiding that rubbing sticks together thing), fire up my computer to write this blog, and other things that come from Ben Franklin’s kite discovery a couple of centuries ago. I pay my rent bill so I don’t get kicked out on my behind and actually have a stuff to put my, to put what George Carlin eloquently referred to as, “stuff”. I pay my car payment so I can avoid having to take the bus to work, and then I get to pay my insurance bill so that I’m legally allowed to drive my car on the road. Add in credit card bills and other little nuanced payments here and there, and honestly, I’m paying a lot of money to maintain a very low level of existence.

But what’s the meaning of it all? I mean, why continue to pay all of this money to entities that don’t care one iota about me in any way just so one can continue to survive? Throughout history, reflective souls have constantly asked the inward-looking questions of “why am I here?” and each generation seems to have one or two philosophers that think they have it all figured out, yet why is it that we still keep having to ask this question? I mean, we can read all sorts of philosophers and think we have it all figured out, but I get the impression that no one has ever really figured it out, because we still have to keep asking the questions. But we don’t seem to come up with any real answers.

I remember a colleague and I once joked in political science that we were challenging the paradigm Americanist belief that all representatives do what they do in order to be re-elected. We posited that perhaps the rationale behind congressional representatives was a little simpler, that maybe they did what they did in office, and to achieve office, because they were interested in dating. In other words: Attracting a potential mate. Sure, those of us in the discipline laughed at us, and we chalked it up as a joke, but if you think about it, there’s probably something there. If you look at it from a basic biological necessity, most people tend to do the things they do in order to perpetuate the species. Men fluff their feathers in hopes of attracting a mate, so why couldn’t it be seen that in the end congressional representatives do everything they do in hopes of perpetuating their species as a biological necessity? Sure, getting elected, or re-elected, may appear to be the end goal, but what if it’s really just a step in a biological direction? I honestly think that scientists aren’t all that interested in examining such issues with sincerity because then it would present all sorts of dilemmas that they don’t want to deal with, especially if the base values of a politician are narrowed down to simple reproductive functions.

Which brings me back to my original question of “why are we here?”. I mean, is that all there is? Are we here specifically just for reproducing, and thus, all of our mannerisms and manifestations mean nothing but achieving survival through offspring? I’d really hate to think that life is as simple as that, and the bigger picture is really nothing more than just the continuation of the species.  Wouldn’t that be truly sad to discover that after all of this evolution we’re no different, or better, than a snail slug? What a joke that would be if our achievement of sentience means absolutely nothing but an ability to acknowledge that we really don’t have a purpose in the first place.

All of this discussion makes it really difficult to conclude without at least mentioning the concept of religion because when it comes to this type of conversation, there’s always this tendency to try to find answers through a “higher” meaning. Having been brought up in the methodist sense of spirituality, I often find it interesting that there are people who can so easily surrender to the idea that it’s all just a part of a religious purpose, that there’s no need to think any deeper than that. In a Penrose sort of way, it’s hard not to be able to acknowledge the possibility of something deeper than basic humanity, but at the same time it’s so difficult to accept that we have managed to figure it all out because someone in an earlier age, with less ability to understand the bigger picture, had it all figured out and wrote it down in a book for the rest of us to follow, especially when the book is so damn confusing, is interpreted so many different ways (often leading to war, subjugation and hatred), and no two copies of “the book” are believed to be any more valid than any other. And then the followers of those books do such horrific deeds and offer up such hatred towards other people, all in the name of doing the right thing.

Anyway, I’m starting to ramble now, so I’ll leave it at that for now.

Why the Kindle never took over the world

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I was in Best Buy this evening, and I was looking an iPad. I wasn’t planning to buy one, but they had three models of it on display, so I decided to take a few minutes to see if it was really an impressive product. None of the main features of it caused me to be all that impressed. And then I started looking at the iBook reading section of it (they happened to have Stephen King’s Under the Dome installed on it, which is ironic because I was planning on buying that on an electronic reader the second I got one (as I really don’t like lugging that HUGE book around, even though I currently own it). Wasn’t all that impressed. I didn’t see anything about it that the Kindle didn’t already do.

Which got me thinking. I don’t own a Kindle right now, but I do have a Kindle reader app on my iPhone. So, I can actually read Kindle books on my iPhone.

Which then got me thinking even further. I started to wonder why Amazon’s Kindle hasn’t made the impact that it probably should.

Let me explain. The Kindle is an excellent device for what it does. From the reviews I’ve read about it (including the testimonies), it is a great reader. Unlike the iPad, it doesn’t suffer from the sun glare if you’re using it outside, and it’s very much like an actual book in that you can read it for hours and not get uncomfortable like you will if you’re reading a computer screen (something practically every other e-reader suffers from). With that in mind, you’d think that the Kindle would be selling like hot cakes. So, why isn’t it?

Well, the answer to that question is found in Amazon’s strategy itself. And it’s one of the most bizarre strategies I’ve ever seen for a company that is trying so hard to set the standard for e-readers.

You see, Amazon wants to corner the market on e-readers and e-books, much like Apple has tried to corner the market on music with its iTunes platform. And Apple would have succeeded if it had done it earlier, but Apple put out iTunes AFTER there was already an MP3 market for music established. People were already burning CDs to MP3s and putting that music on MP3 players. Apple came along and then tried to corner the market on something that was already out of control. And surprisingly, they actually got their foot in the door, but it’s a door that’s been wide open for a very long time.

But books are a different story. There has literally been no e-book market because each company that puts out a reader is a company that has no ability to corner the market because controlling the reader doesn’t also mean controlling the content. And that’s where they all fail. But Amazon had a chance to do it because it is probably the one company out there that has a huge market that serves the reading community. If they would have put out an e-reader and made it easily available, they could have owned the whole e-reader market. And they almost did when they released the Kindle, but they then did one of the stupidest things they could have ever done. They made it so you had to buy the Kindle directly from them on their site.

And that practically killed their chances for world domination. I think of myself as a good example to explain why this was such a failure. I buy books from Amazon all of the time, but I refuse to buy a Kindle, mainly because I’ve never seen one in person. I’ve never held one in my hands. In other words, Amazon wants me to buy their equipment unseen and untested, specifically on trust alone. And I don’t trust them because they want me to spend $259 or $450-something for an e-reader that I’ve never seen in person before. And they’re asking a lot of people to trust them and buy their product without ever having a chance to test it. Unfortunately, that’s a business plan doomed to failure. Sure, they’ll sell a few, but they’re not going to sell the number they need to in order to gain the market share they want and need.

So, Amazon is mainly going to have to focus on trying to get people to buy the books they sell online through their site as Kindle books, but they then made it possible for anyone to have their own Kindle-like product, so they made it even less possible that people are going to buy a physical copy of a Kindle. Which then means someone who has a Kindle reader, but not a Kindle, probably has a device that can then probably handle other programs (or apps) as well, which means any company that puts out a book in a cheap format can easily gain their business.

Apple has now jumped into this market and is trying to create its own iBookstore which it hopes to control like the iTunes marketplace. Not going to happen because there are already so many other more trusted places to get book content that Apple is never going to be the “go to” place for that. It’s just going to further saturate the market with more places to find e-reader books, and thus, it will make it that much harder for e-books to take off because there will not be any one format. People will become so frustrated with trying to tap into this market that they’ll just consider it one of those unrealized areas of content and continue to buy books in hard copy.

But Amazon could have won the war right from the start if they would have done one thing, and that’s license other companies to sell their Kindles. Imagine the business they would have gained if they would have had Best Buy selling Kindles. If they would have dropped the price to about $199 and then put them in every Best Buy, they would practically own the e-reader business across the country, and who knows….the world. But they didn’t do that. There were no apps being made for the Kindle, so the only way to read books on it would have been to buy them from Amazon. It was a win-win situation, but they didn’t think it all of the way through.

Instead, we have more and more readers coming out and no way to figure out how to get the books onto those readers, so those readers are going to fail overall, and manufacturers will figure that it was the customers not wanting to buy books for devices, when in fact it was a failure of the devices to capture an audience that was willing to then buy content.

That’s why the Kindle never took over the world, even though it probably could have.