Monday, August 15, 2016

Multiplexity: Difficult Questions in a Complex World

People in general don’t ask the right questions or don’t bother with data that contradicts their presumptions.  The globalized world is so complex and specialized, the only sane starting point is that you know nothing unless you have information from an honest expert. Unfortunately, most of us get information from TV, which relies on titillation or outliers to gain eyeballs (but not brains).  Once we consider how few companies control the news; how much the military and government spend on advertising (the amount is so large, the Congressional Research Service once remarked, “It is unclear how much the executive branch, let alone the federal government as a whole, spends on communications each year.”); and how government agencies funnel information only to outlets that agree with their political positions or support them, we can see the TV is the last place to look for objective data.

In an ideal world, TV would have lots of documentaries and experts discussing the intricacies of their work.  For example, why has crime spiked in x city? Instead of listening to the same pundit try his or her best to fill up the demands of a 24-hour news cycle, the media should showcase the local police chief and sheriff.  Not only would this create more direct accountability, it would force the media to focus on refuting the claims made by the local law enforcement official or to assist him/her in improving conditions.  In other words, under such a system, the media would be useful as a check and balance against lies by public officials or as a supporter of potential solutions.

I don’t watch much TV, but when I see police officials televised, they’re often not responding to any specific issue or providing input about a specific problem they’re seeing within their area of personal knowledge.  Instead, they’re often talking about issues outside of their area of expertise, such as family values.  If I see ten families with single parents who are experiencing problems requiring police intervention, I may believe family values are the primary issue. Yet, because I do not see single parents from more affluent households, I may not be receiving enough data to form an accurate opinion. Even if I did see enough single parents, I may not be able to determine, without extensive interviews, whether the problems I see arise from poverty or some other stressor, such as temporary job loss or inadequate savings.  Problems often have multiple causes, and other than a few persons like Warren Buffett, no single individual possesses enough patience, time, and access to honest experts to identify the source of a complex problem, much less resolve it.  To prevent useless pontificating, the first question to ask any public official ought to be, “What keeps you up at night?” or “What issues did you not anticipate when you first took this job?” or “What issues have gotten worse since you took this job?”

You’ll see two important factors in my analysis above: honesty (truth) and cooperation (absent unique traits possessed by only a few individuals).  A successful society should maximize honesty and cooperation. To do this, we must study what systems and incentives promote such values.  Without such values, nothing else matters if a sustainable and mentally healthy society is the goal.  I’ve been focusing on economic systems and transactions my whole life, believing that the proper incentives within a well-designed economic system will promote honesty and cooperation. I now see that my singular focus on economics stems mainly from my own lack of access to money and financial stability when I was younger.  Even as I add psychological factors to my list of topics to explore, I believe stability and sustainability rely upon providing people with meaningful work (including the option of raising one’s own children) and low inflation in essential items, such as housing and nutritious food. (As a side note, Dan Ariely’s Predictably Irrational is an excellent starting point for anyone interested in the intersection of psychology and economics.)

Below you'll see a very long list of topics and questions.  Each one might warrant its own post, and you'll need patience to get through all the topics.  I suggest doing one topic a day to help with critical thinking.

1. Should you join the military? One reason the Vietnam War ended—with a loss for the Americans—is because of the visibility of the increasing number of Americans who died in the war.  Today, with drones and other weapons, it is easy to kill the enemy (as well as civilians) without incurring dramatic losses, as long as war is restricted to countries that lack access to advanced weaponry. Even with technological superiority, the U.S. has lost every war since Vietnam, except for skirmishes in Granada and Panama.  (The first Iraq war doesn’t count as a victory when it required America to re-invade a few years later, culminating in the creation of ISIS.)

You are thinking of joining the U.S. military.  You live in a rural area where job opportunities are not plentiful, and you don’t want to go in debt to attend the nearest university, which requires you to move to a different city.  You’ve heard of the Chilcot Inquiry.  You know its findings include that the 2003 Iraq war was unnecessary and relied on false intelligence, causing over a hundred thousand civilians to be murdered.  (Note: the U.S. military has a history of killing civilians going back to the Vietnam War, when General Curtis LeMay advocated an ill-advised strategy of using air power and bombs against North Vietnam to end the war “by taking out factories, harbors, and bridges.” Such bombings instead convinced northern Vietnamese residents to join the opposing army in large numbers.)

You may not know that prior to the 2003 Iraq invasion, Admiral Sir Michael Boyce, chief of the British defense staff, advised then-PM Tony Blair that civilian casualties would likely be in the “low hundreds,” but you have a sense that civilian political leadership is focused on domestic economic issues and has lost the stomach to question military leadership. You know that joining the U.S. military might give you opportunities that you would otherwise lack, such as traveling to different countries, and you’re smart enough to know that plenty of civilian positions exist, such as maintaining planes and equipment, or even being a cook on a ship.  You don’t see much value in working 9-6 in a local job, because it doesn’t give you the opportunity to serve a higher purpose or to create lasting bonds.  Yet, you also know if you join the military, you will be subject to greater restrictions on your behavior as well as the possibility in helping your country murder civilians abroad. You know that the two current presidential contenders are incompetent or voted for the unnecessary Iraq War.  What is the correct moral choice?  What is the correct practical choice?  Why might they be different?

2.  On central banks and inflation targeting.  The current economic system relies on ever-increasing inflation, primed by central banks. In the past, each dollar was linked to a finite resource, gold.  Each citizen could trade dollars for a certain amount of gold, thereby providing a check against excessive government spending.  After 1971, the U.S. used its credibility and superpower status to gain the ability to print money.  In doing so, it helped the U.S. increase its military expenditures, which in turn helped end the Cold War, giving the U.S. sole superpower status.

Today, central banks worldwide have issued debt between 30 and 40 trillion U.S. dollars.  From 2007 to 2010, due to the banking crisis, the Federal Reserve alone issued about 16 trillion dollars.  Much of the new debt post-2001, however, has been used for military or intelligence agencies, including, for example, the Iraq war and creating new agencies such as the TSA.  The U.S. has 17 different intelligence agencies.  The direct benefits to American residents as a result of recent military adventurism and intelligence-gathering operations are unclear.  Whereas much of the debt issued to banks from 2007 to 2010 were in the form of loans, requiring them to be paid back, the money spent on the ill-fated war in Iraq and other military activities is often secret and off-budget (through abuse of a Congressional option known as appropriations, designed to allow Congress to fund short-term, necessary, and limited operations without needing to go through the normal budget process but which is now used by the military to gain unlimited funding).

Some Americans argue that central bank printing has corrupted the country and we should either abolish the Fed Reserve or go back to the gold standard.

If we return to the gold standard, what happens to the 30+ trillion owed by central banks? Should countries worldwide agree to waive a portion of the outstanding debt to each other and create a “reset”?  Would doing so help future generations in all countries, who are positioned to pay off the debt?  Or would it not matter, given that the debt can be held infinitely because countries technically have no end date and are assumed to last forever? (And why are we still talking about gold as if it’s the default physical store of value in an age where rhodium, platinum, oil, and silver also have industrial uses? Are there other physical stores of value that would be rare/finite, useful, and universal?)

Part of the reason inflation is considered to be beneficial is because it devalues the debt owed.  For example, if you borrow 1 dollar today, it should be easier to pay off in a year because the value of your wages or assets (like your house) should be worth more.  If your wages or assets are not worth more, a central bank can lower interest rates, which should make it easier for businesses and consumers to spend money and/or borrow to expand economic activity, or it can increase interest rates, making it easier for you to save money at a higher rate than when you took out the loan.  Until 2008, the previous assumptions held mostly true.  Today, such assumptions have been proven false.

Corporations have not been spending money because the economic outlook is uncertain.  (I just saw a Bloomberg article titled, “China, Inc. Has $1 Trillion in Cash That It’s Too Scared to Spend.”) Meanwhile, central banks in export-oriented countries have actively pursued currency devaluation, an artificial way of increasing their balance sheets without adding anything of value.  The situation is so dire that even countries that want to devalue their currency, such as Japan, are unable to do so because their citizens and consumers save substantial portions of their income or do not spend at expected rates, regardless of interest rate changes.  Some banks have even played with negative interest rates and calibrated the exact percentage (about negative 1.5%) after which consumers would presumably withdraw their savings and put them under the mattress or buy tangible assets.  In short, the current American and European economic system depends on consumers buying things they don’t necessarily need even as the prices for essential items, such as housing and education, increase.  In Asia and South America, the situation is somewhat reversed. Consumer goods such as Nike shoes are very expensive relative to income, but housing is affordable outside of certain areas.  Because public or private transportation (jeepneys, buses, etc.) is relatively cheap, buying a home or condo in a smaller or less densely populated area does not cut you off from jobs or your community, though it does cost you substantial travel time.  As a result, life outside of America and Europe may require more patience, but people seem happier despite being poorer in terms of wages and legal rights.

Supporters of central banks, such as Mohamed El-Erian, claim central bank activities saved the worldwide economy as political institutions proved unwilling or unable to act.  This argument is similar to the CIA or military claiming that the only thing that matters in the end is getting things done, and sometimes, actions have to be taken in secret because of political gridlock or lack of public sophistication. Such an argument relies on the assumption that the entity acting has more information and better judgment than everyone else, which may or may not be true, but which is certainly convenient to believe. (Human beings, especially men, are more apt to overestimate than underestimate their competence.)

Like most complex issues, the answer is at least two-sided.  Yes, it is true that central banks saved the day between 2008 and 2010, but it is also true that in doing so, they prevented structural reforms that would have benefited Americans long-term.  When analyzing any claim or proposed solution, always ask: is the goal short-term or long-term success?  Will the problem recur 5, 10, or 20 years from now if we try to fix it this way? If we are asking the public to make sacrifices in the short-term that will create long-term benefits, how do we effectively communicate the strategy?  How do we promote cooperation in an age where politicians have lost credibility, even as cooperation is necessary to improve conditions in the long-term due to the interlinked nature of worldwide economies?  (Note: it is supremely ironic that the U.K. fired the first shot against globalization and cooperation through Brexit, even though it was the former British PM Gordon Brown in Beyond the Crash (2010) who most effectively and presciently stated that worldwide cooperation was necessary to resolve global trade imbalances and to resolve loopholes such as corporate forum-shopping for the lowest tax rates.)

3.  How will the "sharing" economy fit into the picture? As some countries gain greater material wealth, many of their residents no longer have to consider financial incentives as primary motivators.  In an age where the pact between employer and employee is laden with mistrust and factors beyond corporate control (such as China’s willingness to spend x money to maintain its assumed growth rate, which impacts the worldwide economy), how do we create an environment where workers have meaningful lives?  How do we also create incentives where workers are connected to their communities even as work itself becomes disconnected from location?

The above questions are crucial to answer because the American economy—which drives worldwide consumer demand—assumes people will work and willingly go in debt to buy a home (and other goods or services). What we are seeing, however, is that some people are opting out and choosing to rely on inheritances, Airbnb or Uber, or the “sharing” economy, leaving a smaller number of people contributing taxes in the way economic models expect.  (Hence, the battle between Airbnb/Uber and governments, which will probably be resolved after some level of taxation is implemented.)

The key is to ensure that agreed-upon level of taxation does not constantly increase, thereby reducing incentives to join the “alternative economy.”  Once you realize that governments and banks did not anticipate so many young people being able to opt out of the traditional economy, which reduces their taxes and loan generations, which in turn makes it harder to comply with ironclad legal agreements such as negotiated automatic COLA increases, you can see that how the battle between the new and old economic players is resolved and moderated will determine whether people truly have economic freedom.

4.  Perception vs. Reality (with TSA bonus).  A huge problem is that the things we call x no longer mean x—in practice, they lead to completely different outcomes.  Education no longer guarantees accurate knowledge, skills, or jobs.  The law doesn’t lead to justice.  Religion doesn’t necessarily lead to long-term outlooks, even though God is presumed to be infinite.  Rather than resolve legal problems such as removing incompetent workers, government agencies resort to spending taxpayer dollars to create “community relations” programs such as life-sized dolls of police officers designed to attract (brainwash?) children.

For example, in some American cities, police are stopping passengers to give them free ice cream and in doing so, are using the incidents (and unwilling participants) as free PR. One need only to look at the faces of the terrified African-American passengers stumbling over themselves to say “Sir” before one realizes several disheartening conclusions: 1) police departments are so disconnected from their communities, they actually thought stopping random minorities was a good idea; 2) police departments are so deluded, they don’t realize that the people involved probably won’t deny consent to the incident being videotaped and broadcasted to the world because they feel coerced; 3) communities are somehow not outraged over this use of police time and services, which means they either lack an easy way to be heard; think they won’t be heard even if they complain; think they might be targeted if their complaints are heard; are apathetic; or are so disconnected from minority communities they cannot empathize with their obvious fear.  In any case, all roads lead to procedure trumping substance, indicating that PR has become preferable to substantive change.

When marketing trumps actual reform, it is time to be concerned.  When marketing is considered more worthy of implementation than actual reform in a country with easy access to guns, it is time to pay attention. When marketing overrules common sense in a country where over half the population is essentially living paycheck to paycheck, it is time to evaluate the character of its people.  If all three occur at the same time…well, perhaps it is time to leave or opt out.

Even though governments are considered to have infinite lifespans and corporations can declare bankruptcy or go out of business much more quickly, in the current political climate, it appears corporations are more incentivized to think long-term because Coca-Cola wants you to drink its beverages 1,000 years from now, whereas politicians just need you to vote for them every 2, 4, or 6 years.

As a result of our strange new world, where everything seems flipped, different groups have used democratic legal systems to give themselves protection from market whims, but without any additional benefit to the public.  What is the benefit in keeping an excessively violent officer on the force? Assuming repeated and excessively violent conduct, any benefit to police officer morale is eliminated by the overall resentment and mistrust that occurs when the public realizes it is forced to pay ever-increasing taxes to maintain a culture of unaccountability.  Yet, in states where police are allowed to unionize, their self-interest continues to outweigh the public interest.  Such a scenario is shocking when you consider all the assumptions inherent in a democratic society.  The non-police public, after all, vastly outnumber the police, and the police are generally not allowed to go on strike because they are considered to provide essential services.

How did unaccountability come to rule the day?  It is partly money, but not in the way you think.  If we assume that government agencies are able to get automatic funding every year, regardless of results—and indeed, many states have passed laws that mandate a certain percentage of tax revenue go to certain departments, regardless of overall economic circumstances—then they can plan long term and can become important purchasers.  The power to divert their automatic tax revenue to specific people and companies means everyone from individuals to small businesses to large corporations needs to conform to the specific policies of the government or risk losing a bid.  (Can you now see why giving any government entity a blank check in the form of central bank printing is a problem?)

In practice, employees may favor specific companies or entities and voice dissatisfaction if a competitor is chosen for a bid, rankling the leadership, which is more concerned with morale and the status quo than improvement.  Why?  Because if the funding each year is automatic and not based on any specific metrics, the leadership is incentivized not to improve each year, but to maintain the status quo and to avoid a loss at any cost (a loss including both tangible and intangible items, such as embarrassment, etc.).  Once we realize that government entities are incentivized in a particular way, then we can easily see that censorship will be favored over transparency and accountability, especially if the avoidance of loss, such as public embarrassment, is the goal.  It’s not a difficult step to understand if censorship is more favorable to receiving automatic funding every year, with a possible increase, that government entities will lobby for special protections if transparency is pursued by the public (unique privacy rights, legal standards of discretion that are more subjective than objective, etc.) and/or will use fear to help increase tax dollars above the guaranteed minimum. It also follows that it’s easier for government entities to engage in superficial activities like “community relations” to create positive PR rather than fixing structural problems, such as removing excessively violent police officers or incompetent government workers under a unionized system where the government agencies help elect government officials both with political funding and so-called “volunteer” hours in campaign support.  What’s easier in the modern era?  Sending a few cops to your local school and paying them OT for a few hours to smile and look good, or actually trying to remove the 10% or so of the bad apples that have shown a repeated lack of good judgment?

With no real consequences for misbehavior or a lack of improvement, hubris rules the day, removing humility and creating antagonism between the government and the public it is supposed to serve.  Welcome to America, post-9/11.

(Side note: I once had a low-level American TSA worker confidently tell me his detailed scientific opinion about the safety of the new scattershot x-ray machines when they were first introduced.  I’ve traveled to at least 20 major airports in South America, the Middle East, and Southeast Asia—except for one airport, none of them use the new body scan machines.  It’s almost as if most countries are waiting to see whether the technology is worth spending taxpayer money or if there are any long-term health effects. You couldn’t convince the low level TSA agent about his lack of scientific knowledge, though—he had read something (perhaps given to him by the agency?) and appeared to be parroting it, word for word, in the most arrogant tone of voice.)

5.  Tolerance of Dissent.  Let’s follow up on the increasing intersection between government spending—much of it without any consequences for employee bad behavior or the need to improve or even deliver services or results in order to receive taxpayer funding—and its impact on free speech and dissent.

I was working in a fashion retailer HQ’s in San Francisco, California.  One day, in the publicly accessible area of the ground floor, open to everyone, the company held a security fair.  Among other participants, the FBI and SFPD showed up with freebies and brochures.  I shook the hand of the uniformed SFPD officer at his table, but the two FBI representatives weren’t as hospitable.  When I reminded them that their agency spied on MLK and missed 9/11, one of the representatives demanded to know my name—even though I was wearing an ID card on a lanyard that had my full name and picture on it.  Given the FBI’s history of spying on political dissidents, I became upset and demonstrated my displeasure by stepping backwards (to prevent any claim of physical intimidation) and flipped off the table.  Mind you, this discussion revolved around repeated failures by the FBI—a substantive political issue—and ended with the FBI representative demanding to know my name in an angry voice.  I went upstairs to get back to work, but I decided my political dissent wasn’t yet complete.  I went downstairs and stood a healthy distance from the FBI table, within sight of the SFPD table, and continued to flip off the FBI table.

Shortly afterwards, a security employee at the fashion company took me into his office and escorted me out of the building, even after I explained to him that my conduct was in response to the FBI demanding to know my name after a political discussion in a publicly accessible area.  I was almost immediately locked out of my company-provided laptop and told I could not return to the building to return the laptop, but needed to mail it in. (I returned the laptop in person anyway without further incident.)  When I contacted one of the legal counsels at the company I’d worked with—someone who ought to understand the importance of political dissent and the history of the FBI in suppressing it—he also toed the company line, showing no support for my non-violent speech, even after I explained what happened.  This might be a good time to mention the company’s advertising has recently involved rebels with tattoos and non-conformists.

Let’s recap: a company relying on non-conformist branding sided with the government rather than a minority after the government agency—known for illegal and unnecessary surveillance on American citizens even before 9/11—angrily demanded to know the minority’s name after a short political discussion.  (By the way, the security employee was African-American. I’m sure he thinks he would have supported Muhammad Ali when he was in trouble and controversial, but I think if he were white, he probably would have sided with the government. Our modern era institutions are so good at marketing, the brain can firmly believe one supports non-conformity even when one acts automatically against it.)

Again, welcome to America, post-9/11.  Such is the corrosive effect of giving security agencies in America a blank check—the amount of money involved, not to mention the possible need for security connections to get information that might not be publicly accessible due to a lack of transparency, turns most Americans into willing agents of the government without a need for direct employment or funding.  Now consider that according to The Atlantic, “Nearly half of Americans would have trouble finding $400 to pay for an emergency…[and] 55 percent of households didn’t have enough money to replace a month’s worth of lost income.” (May 2016, Neil Gabler) We can see that with so many cash-strapped Americans relying on the potential for government spending for jobs or direct employment just to survive, the democratic tilt is in favor of a repressive police state even as people believe themselves to be nonconformists.

6.  With magazines and the TV using heavy makeup and photoshop to dramatically alter one’s own appearance, it’s no surprise that ordinary people worldwide love apps that change reality. The danger is that it has become so easy to change reality virtually and artificially that our brains are fooled or diverted from wanting to actually change reality in a structurally positive way.  Even Brave New World didn’t imagine a future where people would actively alter reality to present themselves falsely to friends and strangers and then base one’s self-image on imaginary clicks or views of support.  At least soma was a tangible thing and subject to manufacturing costs that caused a direct physical reaction, not something free that relied on imagination and false pretense.  Lacking physical barriers or limitations, the latter can spread worldwide like an uncontrollable virus.

7.  Free markets in an age of foreign state-owned banks and investment.  The merging of corporate and governmental power has been called fascism, but such a label does not tell the whole story in the modern age.  Consider potash sales, which can improve crop productivity.  Worldwide, agriculture continues to represent an outsized economic sector.  (By the way, one way to see different jobs in different countries is by joining In Lebanon, women often ask for loans to open beauty salons, which tells you no matter where you are in the world, dermatology and hair products will always sell.  Here’s one of my Kiva pages, in case you’re interested:

With most products, sellers negotiate a price directly with each buyer, but with potash, China has decided that it will protect its agricultural workers by acting as a de facto wholesaler. (In reality, the move protects the existing government because many Chinese citizens work in the agricultural sector, and China is wisely pre-empting internal strife by taking care of its rural citizens and keeping an eye on food inflation, an issue India and Thailand have not yet mastered.) As such, China requires foreign potash sellers to negotiate a single price for the entire country in order to do business, which provides its farmers with a substantial discount and also sets the benchmark for price negotiations with other entities, including large private companies and other countries like India.  In contrast, American farmers and companies presumably have to buy potash through distributors (aka middlemen), which obviously creates an additional markup on top of the higher price paid due to the lack of a nationwide discount based on volume.  In short, American farmers are at a disadvantage because their federal government does not negotiate directly with potash sellers and instead allows the “free market” to set the prices, which is misleading, because the free market is now being influenced by another government’s actions.  Funny thing about “free markets”—they’re easily influenced by major players who don’t have incentives to stay within the same system as everyone else.

Even if you’re the most ardent free market capitalist, you can see that the American government standing still disadvantages American farmers, who then resort to domestic lobbying to get benefits such as ethanol subsidies at American taxpayer (and nutritious) expense.  The federal government might retaliate by restricting Chinese agricultural exports, but such legal wrangling on the international level is of limited value because a) China can sell its food products to another country, which can easily remove or ignore origin labels and re-sell it to U.S. consumers (at a markup, of course); and b) major countries sell so many products to each other that protecting one sector could lead to equivalent retaliation, which, if not contained, could harm everyone.  (P.S. Globalized trade is also why economic sanctions don’t work, unless you’re trying to deny medical supplies to kids in Iraq, which is basically what the U.S. ended up doing during Saddam Hussein’s reign, bolstering arguments that the U.S. is immoral.)

So what do we do when globalization and the “intangible” services economy have upended established economic theories, leading to voter backlash against academic elites?  Most people don’t know that government spending as a percentage of GDP is not much different in America than in so-called socialist countries like Sweden.  In America, government spending in 2013 was about 40% of GDP; in Holland, it was about 46%; and in Sweden, it was about 52%.  Setting aside obvious differences in population size, poverty, and diversity, Swedes receive fully or almost fully subsidized education, including college, and healthcare, whereas Americans are often in personal debt to receive such services.  Of course the Swedes pay more in personal taxes, but in general, after taking a 401(k) and/or a mortgage deduction, most Americans making less than 125,000 USD annually will not pay more than 25% a year in income taxes.  In short, an 11% differential in tax rates cannot explain the vast differences in government services.

Thus, the key is to focus on how tax revenue is distributed rather than tax rates themselves; then whether it is used efficiently; and finally, whether it is accomplishing its stated purpose.  No single voter or government official or even several of them acting together can do that—cooperation is required across local, state, government, small business, and multinational players.  In other words, in an era where more cooperation is necessary to make America great again, America has never been more fractured in spirit.  Throw in the fact that Americans today are more than willing to antagonize others for no reason other than because they can, and we have guaranteed American decline in a world where other countries’ governments are acting carefully and in ways that maximize their advantages in concrete, practical, and tangible ways.

(Note: cooperation does not and should not mean sacrificing one's independence.  Local entities and their residents should be wary of cooperation that looks more like partnering or a merger than knowledge transfer or sharing expertise.)

8. Patriotism and unity. What “coming of age” rituals can Americans (and other countries) agree upon, or should such rituals be restricted solely to the private sphere?  On this topic, I have very little to add.  I personally credit high school wrestling with my own coming of age, but I also know each person’s experience with sports is different.  Yet, I am troubled by the contrast I see between Americans and Thais, Brazilians, and Filipinos.

Thais, Brazilians, and Filipinos are some of the most diverse people you’ll ever meet.  A Thai could have brown or light skin, or be of Indian descent; Filipinos are mixed with Chinese, Spanish, and Malay; and the best second passport is a Brazilian one because Brazil has Anglos, Lebanese, Chinese, Japanese, Portuguese, and everything in between, so there’s no “Brazilian” look that will attract attention at airports (unlike a Chinese traveler with a Russian passport, for example).  Somehow, everyone I’ve met from these countries is united and proud to be associated with their country (though not necessarily their government) to the point where most get offended if you ask them if they’re actually Thai or Brazilian.  They always make a point to vehemently reiterate that they’re from the country even though their grandparent was full Chinese. How did three countries more diverse than America (outside of a few of America’s major cities like NYC) end up becoming much more inwardly and quietly patriotic, with overt displays of patriotism such as flying the national flag less common? (I’ve noticed that in countries where citizens fly their national flag more often, there is more division and less unity.) I don’t know the answer to this question.  Someone should study it.   It’s not just the three countries I mentioned, by the way.  Colombians, for example, will give anyone a run for their money when it comes to national pride.

9.  Multiplexity--my definition. Any modern root cause analysis of problems contains “multiplexity,” or multiple reasons and causes creating complex outcomes (my term, as far as I know--not the standard definition).  For example, I met a Filipina in the Philippines and asked about her son.  She had met an Aussie miner several years ago, during the mining boom caused by China’s infrastructure spending, and she fell in love. Unfortunately, the Aussie miner disclaimed her child until after she took a DNA test, fracturing the relationship.  I asked her what future she hoped for her young son.  She said she hoped he would become a football player.  I asked whether she read to her child regularly.  She said she had heard it was a good idea, but she relied on the television to teach him English.

I take two main points from my conversation with her.  First, TV and social media’s pervasiveness have made outrageously unlikely outcomes—such as becoming a professional football player—seem normal.  Second, the child exists because of Chinese infrastructure spending and some central bank somewhere changing interest rates in ways that made gold more expensive, which put more money in the Australian mining community.  Yet, you’d never look at the kid and think he exists because of a bank's decisions or foreign government spending—even though he does.  Multiplexity is real, even though it is often invisible.

10.  Teamwork.  One of life’s ironies is that liberals tend to create well-meaning programs without thinking of the way they can be “gamed” and made financially unsustainable by a small percentage of bad actors; as such, programs would often be best implemented by conservatives.  Such a potential merging of different skill sets to create an ideal match is probably why political differences have survived in people.  Take Warren Buffett and Charlie Munger, for example.  Buffett is liberal, Munger is conservative.  Would either of them be anywhere close to their success today without each other?

11.  Overconfidence in data.  It seems like everyone these days is interested in psychology.  Yet, so many of psychology’s conclusions rely on incomplete data.  For example, let’s say I do an experiment with Lindt chocolate, which is generally much more expensive than Hershey’s chocolate.  Such an experiment would probably involve fewer than 3 dollars a transaction or perhaps as little as 25 cents.  A psychologist may arrive at interesting data after comparing demand between the two chocolates side by side at different prices, but the experiment won’t account for substantial differences in the buyers’ emotional states.

If just 10% of the buyers are active investors in the stock market, and the market went up 5% that day, they may be more inclined to buy the more expensive chocolate, and the reverse if the market went down 5%.  Moreover, it’s possible the amounts in question are too small to be meaningful.  For instance, if someone is trying to scam me out of a dollar, I may just give him the dollar to maintain the peace.  How would any psychologist determine whether I am being gullible by pretending not to know I’m being scammed, or making a cost-benefit analysis? In most experiments of this nature, there is no way to accurately separate all the factors in a person’s head and isolate the primary one. (Another result of multiplexity.) As such, most psychology after general conclusions is often worthless.  Indeed, if psychology’s generally accepted conclusions interfere with one’s ability to analyze or address individual problems on a micro-level, they may actually create more negative than positive outcomes, despite being true in the abstract.

Personally, I’m interested in the following issue: it’s clear that the best way to get most people (non-con-artists) to provide unbiased information is to pretend to be dumb. (I always rely on women if I want unbiased information, because they all understand this tactic, even if they don’t use it.)  In doing so, however, one sacrifices credibility and the opportunity to lead the person or his friends, at least in the short-term. What is the best way to reconcile these two competing factors?

12.  Possible solutions. I have some general ideas that may help improve some of our problems:

a.  Have economic incentives, not profits, dictate corporate performance.  We tend to say, “Do what you love, and the money will come,” but somehow ignore this advice when it comes to encouraging corporate employees and the level of discretion given to them.

b.  Stop blindly implementing backward-looking policies.  It’s not just pension funds that refuse to budge from 8% assumed annual investment returns—the problem is often much less political, but passive acceptance of nonsensical policies tends to creep into other areas of thinking.

When I travel, I often buy one-way airline tickets because I’m not sure how long I want to stay in a new country. The current travel system is set up to force airline check-in employees to input a destination after the landing or deny check-in because of the small chance that the destination airport will deny entry to the traveler.  The discretion to reject a traveler without an ongoing destination is because the traveler may overstay his or her visa and work illegally and also because criminals have been known to use one way tickets.  Yet, there is no way an airport employee with half a brain will be able to look at my well-used passport and my bank account (accessible on my phone) and believe I would be a burden, financial or otherwise, to any destination country.  I’ve gotten into arguments with airport staff because I know procedural loopholes they don’t, but my real frustration comes from people not realizing our quality of life will diminish considerably if customer-facing employees and their supervisors do not know the reasons behind the rules and are given the discretion to modify them when needed.  In an age where rules can be accessed on anyone’s phone, why don’t more companies and governments make it easier to find rules and their exceptions and empower their supervisors to interpret them?  (Richard Branson's companies have been successful precisely because of a flexible management style.)  Do we really want to have a society where any non-standard response must be vetted by lawyers and risk managers, who are often based in locations far away from the day-to-day action?

c.  Stop using outliers as the basis of any policy.  One terrorist tries to detonate a bomb in his shoes, and everyone traveling needs to remove his or her shoes (as if criminals aren’t capable of changing tactics).  One criminal uses one-way tickets to minimize detection, and governments implement rules to discourage one-way tickets (even though any idiot wanting to bypass this rule could buy a multi-leg, roundtrip ticket and leave at an earlier stop).

It’s easy to see that entities relying on the perception of maintaining safety would be incentivized to over-regulate rather than give employees discretion, especially when disparate treatment often results from unconscious bias.  Yet, as lower level functions become automated, the main values human employees can add to any organization are common sense and the ability to use discretion wisely.  To encourage such value, companies need to demonstrate more loyalty to their employees and give them more opportunities to be visible to upper management.  One Japanese owner may have the right idea—he tells his employees they won’t ever be terminated because they lack talent, but in exchange, they must work hard.

Conclusion: as private and public entities with more power over our lives become larger, they tend to use top-down rather than bottom-up management.  People are frustrated because they are not seen as individuals.  The advent of social media and the influence of television have made everyone’s lives more difficult by increasing the level of biased information and of broad (and therefore useless) data, while decreasing the time dedicated to contextually complete and nuanced information.  Everyone is convinced they are correct and honest even if they see only one area of a picture; yet, in an era of multiplexity, it is more likely that people are wrong than right. Whether people begin to realize their perspective is limited, despite the vast amounts of information available to them, will determine whether the human race prospers.

Lawrence Ferlinghetti once said, “It seems that mankind is too stupid and greedy to save himself.” He was referring to ecological annihilation, but his statement sadly applies to many more areas. Perhaps humankind isn’t too closeminded to save itself from people who insist on using fear and complex legal maneuvers to drive their version of progress. Time will tell whether we can reverse our current path. We’ll have one indication of our direction in the November 2016 elections, and another indication when or whether Congress reverses its long-standing reliance on appropriations to fund military adventurism and expansion.  Will the world be driven by countries needing to buy hundreds of billions of dollars of advanced weapons each year, or will people finally demand that politicians work together to advance cooperation on both micro and macro levels? Multiplexity demands either increased worldwide cooperation, increased segregation, or decreased size.  Only one of those options encourages a world with reduced conflict and fewer misunderstandings.

May the odds be ever in your favor.  

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