The Hegelian-Discordian Dialectic in the Era of Trump

Given this blog’s theme of “my thoughts and the influences behind them”, I really can’t pass up the chance to comment on this recent post by the Archdruid (Emeritus), John Michael Greer, a Hegelian-Discordian analysis of the recent election. Excellent, excellent post. And very relevant to me because of my own fondness for Discordianism, that great joke religion / joke / actual religion (hail Eris! all hail Discordia!). To recap the central bit:

The Hegelian theory of history involves phases of thesis (a worldview rises to dominance), antithesis (a reaction to that idea emerges to oppose it), synthesis (the two are reconciled somehow and the cycle begins again).

This violates the key Discordian principle that all worldviews (including Discordianism), are hopelessly broken in the face of ultimate chaos. It also maybe violates the Discordian principle of the Law of Fives: “All things happen in fives, or are divisible by or are multiples of five, or are somehow directly or indirectly appropriate to 5.”

Thus, Discordianism has its own Hegelian-Discordian theory of the cycles of history: Thesis, antithesis, synthesis, parenthesis, paralysis. Also described in terms of flavors of disorder: Chaos, Discord, Confusion, Consternation, and Moral Warptitude. In the last two phases, there are increasing efforts to paper over the insufficiencies, inherent contradictions, etc. in the newly-synthesized status quo, followed by everything going completely socioeconomireligopoliticulturally screwy.

Currently, the world is dominated by a neoliberal/neoconservatives status quo. Given that the world is dominated by similar modifications of nominally-antonymic ideologies with definitions that have substantially converged1, Confusion clearly abounds. And recent populist revolts against that status quo, which seem like a trend, also don’t fit the usual pattern of ideological Discord. (e.g. the voters for Brexit were doing so without some really basic facts about what policy changes would result and when, and Donald Trump’s willingness to say the “unacceptable” is a heck of a lot more consistent than his stance on basically any policy issue.) I’m not saying there aren’t ideological disagreements with the status quo present throughout all of this, but there’s a point where disagreements with the status quo are no longer in the drivers seat and a general desire to tear down the status quo is.

Moving beyond the recap, that JMJ post got me thinking about the topic of internet trolls. I’ve joked that with the election of Trump, America’s first black President is being followed by America’s first troll President

Trolling seeks to upset or confound, to elicit a reaction. In parallel to the above, trolling can be ideological, but there’s a point where the desire to advance some ideology is no longer in the driver’s seat and trolling for trolling’s sake is. So one could (as I am about to do now for the hell of it) take the Hegelian-Discordian Dialectic and turn it into an ad hoc taxonomy of trolling:

  • Chaos - Straightforward trolling
  • Discord - Trolling as a means to an overt political end
  • Synthesis - Concern trolling and other forms of covert provocation
  • Consternation - Trolling as an overt rejection of norms of civility
  • Moral Warptitude - Trolling for trolling’s sake

Given that analysis, 4chan’s “random” board, /b/, is one of the most dramatic and obvious examples of Moral Warptitude on the internet. To the extent that part of the internet can be unmoored from surrounding norms of civility (i.e. not completely), /b/ is. But to be a nexus of trolling means that it’s all “trolls trolling trolls”, and while such nexuses may be free from norms of civility in some sense, they’re surrounded by societies where those norms are still kicking. The form of chaos that characterizes the interactions at the interface between internet trolldom and the rest of society is Consternation. And, as previously established, we’re in a political moment where Consternation reigns supreme.

I doubt Trump is spending much time on /b/, and his trolling style is definitely more off-the-cuff and boorish than witty or elaborately self-referential. But Trump doesn’t have to be a paragon of trolling to be the world’s most successful internet troll. He just has to be an internet troll who’s just gotten himself elected President of the United States.

Because bigoted rhetoric confounds and upsets, insincerely adopting that rhetoric can be an effective form of trolling, and sincerely doing so can be an even more effective form of trolling. The current social media landscape is tuned to make resharing content easy, which means it’s tuned to making retrolling trolling easy. It’s reasonable to think that someone as central as the President tapping into this kind of thing could give the Overton window a giant shove, and there’s more directions in which we could go into an era of Moral Warptitude than just a general defeat of the norms of political correctness.

1. For example, a Google search for those two words reveals definitions of “relating to a modified form of liberalism tending to favor free-market capitalism” and  “relating to or denoting a return to a modified form of a traditional viewpoint, in particular a political ideology characterized by an emphasis on free-market capitalism and an interventionist foreign policy”, emphasis mine. (The definitions seem to be from here and here.)


Not Just About a Particular Election

A few questions:

  • How skeptical are you about the ability of [centrist/radical] approaches to achieve good outcomes and avoid bad outcomes?
  • What is your general sentiment about [ambitious/compromising] goals?
  • When an [attribute] politician is accused of being egregiously [negative trait], how much are you inclined to correct for a perceived bias against [attribute]?
  • When evaluating how much you like or trust someone, what factors matter most to you? Are you more inclined to go with the crowd in your evaluation, are you contrarian, or just idiosyncratic?
  • In your evaluation of the status quo, do you put relatively more emphasis on positive or negative things? (That is, are you more of a “glass half full” or “glass half empty” kind of person?)
  • How comfortable are you with ambiguity?
  • Do you think more about strategy or tactics?
  • How well are things going for you personally? If the answer is “well”, are you inclined to think that success is based on things that are stable or unstable? If the answer is “poorly”, how much to you agree or disagree with “better the devil you know”?
  • When you tried working [within/outside of] “the system”, how has that worked out for you personally in the past?
  • What is your general sentiment towards “the mainstream”?

Why do people who mostly agree make different predictions about contingent future outcomes?

How confident are you that any reasonable person would agree with your predictions?


Thoughts on "Victimhood Culture"

This article in the Atlantic has been making the rounds recently, commenting on a recent scholarly paper (sadly paywalled) on the theory of microagression. Some things that struck me about the piece:

1. It’s strange that most of the commentary on the article acts as if Campbell and Manning (the authors) are dispassionate sociologists, when they clearly have a dog in the fight. They’re charactering past cultures in terms of virtues those cultures nominally value, then don’t even try to identify what virtue the modern culture they disparage is reaching for. It might be accurate to speak of a “solidarity culture”, where the way to respond to a slight is to encourage mass opprobrium, and shibboleths and linguistic norms that demonstrate in-group identity are of paramount importance.

2. It’s really strange that the Atlantic article comments extensively on a blog post from nearly two years ago. Sure, the blog has “microaggressions” in the title, but the Oberlin Microaggresions Tumblr was active from February to September 2013. Despite the title, the stuff it started off cataloging doesn’t exactly fit the bill. (The point of microaggressions is that stuff that’s not overtly aggressive can still be grating, not that it may be ambiguous to what extent an overtly awful person is being a troll.)

3. That blog starts out as a discussion of really overt racism, continues with posts that are a mix of overt racism and the sort of thing actually meant by “microaggressions”, then ends with an angry rant by a Hispanic student who tells a white student to “leave the soccer team” for daring to speak a word of Spanish, mocks their attempt to apologize, and asserts that they “take up to [sic] much space”. The blog ends at that point, with no explanation why. Probably whoever was running the blog moved on to other things, but it would fit the narrative arc to say that last post was some sort of culmination of the state of racial discourse at Oberlin, at which point students decided to never write about that subject, or possibly any subject, ever again. (At the very least, such a narrative would make fine fodder for an Atlantic article.)

4. The article notes:

If “dignity culture” is characterized by a reticence to involve third parties in minor disputes, an argument could be made that many black and brown people are denied its benefits. In a city like New York during the stop-and-frisk era, minorities were stopped by police because other people in their community, aggrieved by minor quality-of-life issues like loitering or sitting on stoops or squeegee men, successfully appealed to third-parties to intervene by arguing that what may seem like small annoyances were actually burdensome and victimizing when aggregated.

To what extent are non-collegians engaged in policing microaggressions by another name?

If you already have political power, it is easy to be dignified. Simply appeal to the law only for serious matters, once your culture has successfully set the definition of what is “serious”. Anything not serious can be easily ignored.

5. Were the lunch counter sit-ins of the 1960s a product of “dignity culture” or “victimhood culture”? Those protests neither “exercised covert avoidance” nor “sought only to restore harmony without passing judgment”. They appealed for political support against something other than “the most serious of offenses”. Was that an example of “toleration and negotiation”, or a “complaint”, aimed at winning the political support of third parties?

6. A Megan McArdle piece on the same article notes (of duels):

The seconds, the formalities, the extended opportunities for apology, raise the cost of fighting, lower the cost of not doing so, and thereby mitigate the appalling violence to which honor cultures are prone. Unless victim culture can find similar stopping mechanisms, it will collapse into the bloodless version of the endless blood-feuds that made us seek alternatives to honor cultures in the first place.

“Bloodless” is still more than enough to ruin lives, of course. And even when overt violence has been relegated to the margins, any sufficiently big mob is enough to give a violent fringe plenty of motive force.

7. The Atlantic article links to a post by Jonathan Haidt. Haidt wrote a book called The Coddling of the American Mind. In the page on his site where he talks about critical response to the book, he writes:

The New Republic: The trigger warning myth, by Aaron Hanlon. This is a thoughtful essay about the sensitivities needed to lead a seminar class through difficult material. His main point is that TWs are not a form of censorship. I agree. He argues that sometimes guidance is needed beforehand. I agree with that too. I just think its very bad for students to call it a “trigger warning,” or to do anything to convey to students the expectation that they will be warned about… everything.

So you want to write a book about how annoying liberals are, but lack any substantial disagreement. Nothing to do but get into a knock-down drag-out fight about linguistic norms.

8. “Political correctness has gone too far” has gone too far. Well, that’s the joke. More accurate would be: “Political correctness has gone too far” has not gone anywhere.


Asimov by Way of Japan

I recently enjoyed revisiting a favorite anime series, Time of Eve. There are a couple of things that stand out about the series. First, it’s by Yasuhiro Yoshiura, who is a brilliant director of short animated works (like the earlier Aquatic Language). Second, the format was really unusual, it was a series of six fifteen-minute episodes released online, later compiled into an (almost identical) movie. Third, it’s straight-up Asimovian science fiction, Three Laws of Robotics and all.

I really like Asimov stories, in large part because they’re generally stories about friendly AI. Not that I dislike stories about unfriendly AI, but it’s easy for a story about unfriendly AI to fall into the same tropes as other monster or disaster stories. A lot of the Asimov short stories are straightforward mysteries, but there’s also room for telling tales with a lot more ambiguity.

The story is set in a world where robots are at a casual glance indistinguishable from humans, save for their rigid patterns of speech and behavior and the holographic status rings that hover above their heads. A high school student notices an odd entry in the log of his house android, and follows that to a strange cafe, Time of Eve, with a single rule clearly posted at the entrance: “In this cafe, make no distinction between humans and robots.”

Many of Asimov’s stories focus on issues of industrial activity or political struggle. But the Powell and Donovan of this series are not industrial debuggers but high school students. The story has strong themes of conventions of behavior versus a desire to express one’s true feelings and to understand the feelings of others. The cafe of the title is a place where one can enjoy a moment of quiet contemplation, amidst an epochal change in society that has not quite become manifest, not yet.

If you’re a fan of Asimov’s robot stories or would enjoy an interesting take on that sort of setting, I definitely recommend this work. The first episode can be viewed for free on Crunchyroll (though splitting up a 15-minute episode with ads is rather unfortunate), paid members can stream the rest (but there’s a free trial). The movie can be purchased here.


Whiteboard Teamwork?

Circus Manager: How long have you been juggling?
Candidate: Oh about six years
Manager: Can you handle three balls, four balls, and five balls?
Candidate: Yes, yes and yes
Manager: Do you work with flaming objects?
Candidate: Sure.
Manager: …knives, axes, open cigar boxes, floppy hats?
Candidate: I can juggle anything
Manager: Do you have a line in funny patter that goes with your juggling?
Candidate: It’s hilarious
Manager: Well that sounds fine. I guess you’re hired.
Candidate: Umm… Don’t you want to see me juggle?
Manager: Gee, I never thought of that.

(From Peopleware by Timothy Lester and Tom DeMarco, 1987.)

Hiring programmers without seeing them program was last year’s technical interview mistake.

But hiring collaborators without seeing them collaborate is today’s.

I was at BarCamp Boston today, and attending a panel on conducting technical interviews got me thinking about the subject of “culture fit”. It’s a ubiquitous phrase in material about technical interviews, but it’s a phrase viewed with skepticism, even derision, by people who view tech company culture with a critical eye. And for good reason! First impressions are ambiguous, it’s easy for unconscious bias to sneak in, and people are inclined to view those more similar to themselves as being more likeable.  But diversity of opinion can be a powerful defense against certain sorts of groupthink-y bad-decision-making patterns, and it can be very worthwhile to have teammate members who disrupt the status quo in productive ways.

“Culture fit” can’t just be ignored, though, since that vague concept does cover some genuinely relevant skills.  It’s important that a new hire will work effectively with other members of their team. But the way those skills are measured in programmer interviews is rather similar to the old way of hiring programmers that inspired the Peopleware parable I quote above: Asking some tangentially-related questions and getting a gut sense that someone will do well.

I’ve never seen tech company interviews that try to test collaboration directly, but I actually have seen one interview process that did. My alma mater, Olin College, has a two-stage admissions process, and their Candidates’ Weekend includes a group exercise / interview that allows candidates’ collaboration skills to be directly challenged and observed.

A few people at the panel mentioned things they’d seen tech companies do to try to test collaboration skills in an interview:

  • Pair programming with candidates on prepared exercises.
  • Having employees work together with candidates briefly on the employees’ personal or open-source projects.
  • Having exercises where the candidate does a code review.

There were also a few mentions of things done to give candidates more of a trial period and mitigate the cost of leaving early if it wasn’t a good match:

  • Bringing on candidates as fixed-term contractors first.
  • Mitigating the financial costs of quitting (by paying employees who leave).

Some of those things might mitigate concern about “culture fit” when hiring.

Still, I think that when it comes to interviewing programmers, a somewhat mature methodology has been build up for judging programming ability, but the methodology for interviewing for collaboration ability still has a lot of room to grow.  What’s the FizzBuzz of measuring collaboration ability?


Eight-Bit A Capella and Creativity Through Constraint

One of the things I enjoy is a capella remixes of video game music.  There’s a lot of reasons I find that compelling:  Can’t underestimate the nostalgic power of something you’ve heard over and over growing up, and some of the music is just really good.  But one reason why it’s compelling is that both old video game music and a capella singing are great examples of creativity through constraint.  Of course, any musical composition is creative, but there’s a different sort of lateral thinking required if you want to evoke the musical tropes of orchestral music without the benefit of an actual orchestra.

Want an epic pipe-organ theme for your ominous final level, but all you have is an 8-bit soundcard?  Do it anyways!

(Though I would love to find a great rendition of that on an actual pipe-organ.  This one is awesome in parts but trips over some of the super-hard arpeggios, this extended cover doesn’t stumble, but it slows the tempo down quite a bit.)

A capella music faces a very similar issue, and thus in the case of covers of old video game music, provides a striking twist on one of the aspects that made the original great.  Same creative essence, different constraint.

For an example, let’s consider a track from one of the greatest games on the Super Nintendo, Secret of Mana.  The soundtrack for that game was composed by Hiroki Kikuta, a brilliant composer with a knack for getting the most out of the limited hardware.  This track is an early theme from the game called “Into the Thick of It” (少年は荒野をめざす, “A Boy Heads Into the Wilderness”).  Here’s the original:

And here’s a rendition by a capella musician Smooth McGroove (see also on Patreon):

Of course, you can provide a similar twist by taking things in a different direction.  Here’s a full orchestral version (a medley, but the song above can be found from 4:52 to 6:10):


Praise for "Hanabi"

I’d like to take a moment to discuss a particularly brilliant card game that’s caught my attention recently.

To not get bogged down in the details of the full rules, I’ll describe only the crucial details of Hanabi:

  1. Hands are reversed; each player can see every other player’s cards but not their own.
  2. Players cooperate to complete a solitaire-type task, building piles of cards in a set order.
  3. The sharing of information is carefully regulated and limited by the rules.

The thing I think is most interesting about the game is how well it reflects a key concept in Japanese culture, the distinction between honne (heartfelt desires) and tatemae (proper public expression).

In Hanabi, it is sometimes possible to give another player enough information to be sure a given move is good or bad based entirely on logical inference.  But the rules are strict enough that successful communication must often rely heavily on subtext.  For example, “this is your only red card” might not be enough information to conclude that the card is a valid play.  But pointing out a single card often has the subtext of “play this next”.  “These two cards are your 4s” doesn’t say anything about the cards’ color, but if there are two or more piles on the board topped with 3s, you might infer that either is a valid play.  Then again, not everyone chooses to express subtext in the same way.

There’s an interesting tension between desire to achieve goals and desire to not annoy with impropriety.  It’s interesting to observe how often players come to the correct conclusion about subtext only to second-guess themselves when a bit of errant table-talk sows the seed of self-doubt.

Once, when discussing this, I suggested that the game becomes more beautiful and fascinating when the rules are strictly adhered to, the game passing rapidly with stony faces and relative silence.  Another player astutely argued, “I think the ideal game is one where a player might say, ‘Maybe I’ll do this,’ and the other players might respond ‘maybe’ or ‘well…’ but no more.” Which does indeed remind me of Japan!

When the game’s creator, Antoine Bauza, was asked:

What kind of “conventions” can players legally use in Hanabi? Or, more importantly than the rules, what do you envision an ideal round of Ghost Stories [another of Bauza’s games] look like? Hanabi?

He responded:

Hanabi is all about communication and non-communication. Some like to play it the hard way (just give the information, with a neutral tone), some like to play it the soft way (making small sign, changing tone, using eye contact). It’s an experimental design, so I ask the players to make a move and choose their conventions.

For me a perfect round in Hanabi or Ghost Stories is not one with a formal outcome (a nice move, leading to a brilliant victory, for example), it’s one players will be remember later because it was a great gaming moment. Maybe it was a very bad move, who cares, the point is to have a great experience at the table!

In conclusion, I suggest playing this one if you get the chance.  It’s a great cooperative game, with simple rules that produce challenging and interesting play.  It’s also a great example to look at if you’re interested in game design.


"Do What You Love" as a Weapon and Shield

A recent article in Slate had a critical take on the ideology of work as self-actualization:

There’s little doubt that “do what you love” (DWYL) is now the unofficial work mantra for our time. […]

DWYL is a secret handshake of the privileged and a worldview that disguises its elitism as noble self-betterment. According to this way of thinking, labor is not something one does for compensation but is an act of love. […] Its real achievement is making workers believe their labor serves the self and not the marketplace.

DWYL ideology sweeps non-elite work under the carpet:

Think of the great variety of work that allowed [Steve] Jobs to spend even one day as CEO. His food harvested from fields, then transported across great distances. His company’s goods assembled, packaged, shipped. Apple advertisements scripted, cast, filmed. Lawsuits processed. Office wastebaskets emptied and ink cartridges filled. Job creation goes both ways. Yet with the vast majority of workers effectively invisible to elites busy in their lovable occupations, how can it be surprising that the heavy strains faced by today’s workers—abysmal wages, massive child care costs, etc.—barely register as political issues even among the liberal faction of the ruling class?

And it makes elite work more exploitative:

The reward for answering this higher calling is an academic employment marketplace in which about 41 percent of American faculty are adjunct professors—contract instructors who usually receive low pay, no benefits, no office, no job security, and no long-term stake in the schools where they work.

There are many factors that keep Ph.D.s providing such high-skilled labor for such low wages, including path dependency and the sunk costs of earning a Ph.D., but one of the strongest is how pervasively the DWYL doctrine is embedded in academia. Few other professions fuse the personal identity of their workers so intimately with the work output. Because academic research should be done out of pure love, the actual conditions of and compensation for this labor become afterthoughts, if they are considered at all.  [links theirs]

Robin Hanson had a simple explanation for the popularity of this ideology in a much earlier essay that refers to the same Steve Jobs commencement address:

Now notice: doing what you love, and never settling until you find it, is a costly signal of your career prospects. Since following this advice tends to go better for really capable people, they pay a smaller price for following it. So endorsing this strategy in a way that makes you more likely to follow it is a way to signal your status.

It sure feels good to tell people that you think it is important to “do what you love”; and doing so signals your status. You are in effect bragging. Don’t you think there might be some relation between these two facts?

Hanson also has this more recent post about status and advice:

We get status in part from the status of our associates, which is a credible signal of how others see us. Because of this, we prefer to associate with high status folks. But it looks bad to be overt about this. […] Since association seems a good thing in general […] we mainly need good excuses for pushing away those whose status has recently fallen. Such opportunistic rejection, just when our associates most need us, seems especially wrong and mean. So how do we manage it?

One robust strategy is to offer random specific advice. You acknowledge their problems, express sympathy, and then take extra time to “help” them by offering random specific advice about how to prevent or reverse their status fall. Especially advice that will sound good if quoted to others, but is hard for them to actually follow, and is unlikely to be the same as what other associates advise.

Then when your former friend fails to follow your advice, you get annoyed at them and present that (instead of their lowered status) to yourself and others as the reason why you’re not on such good terms with them anymore.

I think that advice can certainly play such a distancing role.  But I think Hanson’s explanation misses some of the things that make this mechanism complicated:  The proactive nature of advice, the loose coupling between the emotional drives behind status and actual status, and the way status-related drives aren’t isolated from other psychological drives (not by coincidence, that form makes hypocrisy more effective).

When a friend is worried that they will suffer a setback, people want to help them avoid that setback (both due to empathy and a desire to not be associated with failure).  They also want to create emotional distance so that the setback, if it happens, will hurt them less (pain caused both due to empathy and status-anxiety). Both of these motivations underlie a variety of biases in favor of advice-giving.

When offering advice, I’m tempted to overestimate the effectiveness of advice-giving for the following false reasons:

  1. When thinking about my own problems, my emotions cloud my judgment, but I see other people’s problem’s objectively.  Also, being outside of their psychology makes their problems easier to understand, even if those problems involve things like their emotions and goals.
  2. I recognize that my imperfect understanding of my own emotions and goals make my problems harder to solve, but I can solve this problem with second-order advice about what emotions or goals should be.
  3. An understanding of what worked (or would work) for me is generally applicable.
  4. I could solve my problems effectively through sheer intelligence if only I was better at “following my own advice”.  And maybe seeing someone else succeed based on my advice will motivate me!

I think all of those biases increase the tenacity of “do what you love”.


A Random Dance Down Wall Street

In the last few weeks, I’ve been reading A Random Walk Down Wall Street by Burton Malkiel.  Definitely an investment classic, required reading for anyone with more than a few months expenses in their savings.  The very simple conclusion of the book can be summed up as follows:

The strategy for the average investor with the highest expected value is to invest in broad-based low-cost index funds.  Though that’s obviously not the strategy with the optimum return, but it’s impossible to reliably identify a better strategy in advance.

(If you think you’re an above-average investor, the advice still applies to you if: You want some of your investments to be relatively low-risk, you don’t want to put substantial time and effort into researching investments (you’d rather spend it increasing and/or enjoying your income), or you’re willing to consider that your assessment of your investment abilities may be incorrectly high.) 

This book suggests that markets approximate the effect of the efficient market hypothesis (the disclaimer is important, since it’s unlikely that even the weak form of that hypothesis is precisely true, that would, among other things, imply P=NP).  Prices may not reflect all public information right away.  But there’s an incentive for prices to match public information eventually, so in the long-enough term there’s no easy augury that can profit reliably.  (And in practice that term is fairly short, if you want easy money, it’s probably shorter than you like.)  Not to say there’s nothing you can do to accurately predict the future.  It’s just really hard.

There are strong logical arguments in favor of both components of the book’s theory.  As to why the average institutional investor fails to beat the market:

  1. Every time someone chooses to buy an asset that beats the market, someone else chooses to sell it.  (It takes two to tango.)
  2. Generally, both the buyer and the seller are institutional investors because institutional investors do basically all of the buying and selling.
  3. Thus any time an institutional investor gains a relative advantage, another is likely to gain a relative disadvantage.  Taken together, they’d do as well as the market average, excluding the cost of all this buying and selling.
  4. The cost of all this buying and selling is substantial, so on average they do worse.
  5. Thus, buying an index fund also gets you a pre-expenses expected performance of the market average, but with substantially lower expenses.

As to why you (probably) can’t easily beat the market:

  1. If something is predictably under-valued, people will buy it until it isn’t.  (Even if only some people realize it’s undervalued, so there’s little time lag on this component.)
  2. If something is predictably over-valued, at some point people will start to sell it.  (There’s more of a time-lag on this component because they might expect to be able to sell it at an even higher price to a “greater fool”, but savers want to spend eventually and fools have finite money.)
  3. If some investor is predictably good, people will copy them until they no longer beat the market.  (Also, past performance doesn’t guarantee future results.)

So, good stuff.  The book focuses on presenting empirical evidence to back up those arguments, along with a lot of interesting history and a critical look at competing theories.

One weakness of the book is that, for an economics book, it seems to underestimate the effects of supply and demand.  It notes that the value that the market places on earnings and dividends varies during different “eras” of the market, that it was particularly low during the “Age of Angst”, 1969-1981.  During that era, stocks failed to keep up with inflation not because earnings failed to keep up with inflation, but because the P/E multiple fell sharply.  It mentions that the era was characterized by “demand-pull inflation” (demand for spending, not for saving!) suggests that investors were rationally “scared” and thus demanded higher risk premiums, which the market provided with lower P/E multiples.  But that sounds like an ultra-roundabout way to say that lower demand for savings and lower demand for having savings in stocks relative to other (perceived as less “risky”) things caused the P/E multiple to drop.

Which is odd, if you’ve accepted the author’s frame of referring to that earnings times market-average P/E multiple as a “firm foundation of value”, when that multiple is not nearly so firm, and may have as much to do with aggregate demand for stocks (in general) as opposed to anything about the specific companies being priced.  Something like gold, which Malkiel describes as “impossible to predict” has no dividends or earnings, only that unpredictable multiple.


The Silk Road Unraveled

Wow, what a story!

A while back, I wrote a bit about the technology behind the online pseudonymous black-market called Silk Road. I talked a bit about the site from the perspective of a security problem. Now, it seems that the site’s security was not so good. The FBI has arrested the site’s owner, the notorious black-marketeer known as Dread Pirate Roberts, in real life as Ross William Ulbricht. Further reading here, including the formal complaint. (Edited to add: Another great analysis here.)

In the previous post, I talked about the mechanism that minimized knowledge buyers have about sellers. I didn’t really talk about the site administrator. (Though I did mention the administrator could strengthen the site against attack by minimizing the data the site holds on to. Which Ulbricht doesn’t seem to have done.) To be secure, the site administrator would want to minimize their connections with the site. They would log in from an unpredictable place, via TOR. They would communicate only over encrypted channels. They would keep their private key somewhere separate from the servers for the site. Ditto for their bitcoin wallet. Above all, they would minimize their connection to the site, and they would minimize their visibility to law enforcement.

Ulbricht didn’t do any of that, and it proved his undoing. He wasn’t just the president of the Silk Road for Criminals Club, he was also a customer! Using a clearly labeled as administrator account, no less, to buy illegal goods and services directly related to the running of the site. Including packages of physical goods (fake IDs) that could be tracked to his house, and allegedly going so far as to pay hitmen to murder a turncoat former employee (there’s a separate indictment for that one) and a potential blackmailer.

In my last post, I suggested:

Acquiring new accounts to do individual stings is too high cost for too little gain, especially since the value of “flipping” a Silk Road buyer is very low (there’s little they can do to get information on Silk Road sellers).

But failed to note that this does not apply if the buyer in question happens to host the whole site out of his basement.

(Edited to add: That’s hyperbole, of course. The site was hosted outside of the US. It wasn’t being operated from Ulbricht’s house, either. But he was signing in through a VPN gateway at an internet cafe near his home. And not via TOR, either. He also advertised the site soon after it started, and looked for employees for a bitcoin-related startup soon before it started, both under pseudonyms that could be traced to his real identity.)

Now that Silk Road has been seized, any records of sales can be traced. Any buyers and sellers whose records were compromised will be very quickly screwed if they didn’t employ additional money-laundering techniques. Bitcoin may be pseudonymous, but every transaction is intensely public, every node in the network has the complete transaction record.

(Edited to add: The Silk Road itself included a coin tumbler that protected buyers and sellers from knowing one another’s bitcoin addresses. However, it’s not clear if this will protect either buyers or sellers from the authorities now that they have control over whatever data Silk Road retained.)

As far as the value of Bitcoin as a whole goes? Depends, I think, on how much of the price is based on future versus present or past utility. I still think Silk Road is an edge case in the set of things Bitcoin could be used for. But it’s a large portion of the set of things Bitcoin has been used for.