Business – God of the Machine
Jul 032005

Dear Resentful Intellectual,

Some time ago a few of you complained about the filthy lucre that “Chet” was raking in. “Chet” is supposed to be the prototypical Wall Street guy — tall, handsome, personable, eerily well-adjusted, everything but clever. Of course what you really want to know is not why Chet makes so much money, but why he makes so much more money than you do.

Chet does exist. I’ve worked in finance (the software end), and I’ve met Chet. But I’ve also met any number of brilliant people, as intellectual as you please, and Chet usually works for them instead of the other way around. Of the dozen most intelligent people I have ever known, half of them have spent some time on Wall Street. Is George Soros a Chet? Is Taleb? Is Derman? Brad DeLong, after supplying several more examples of non-Chets on Wall Street, explains matters politely:

Part of the answer is that [Chets] are sitting at a nexus: a huge amount of money blows past Wall Street, and if you can sit in the right place with a large net, unbelievable quantities of money will be trapped by it.

A bigger part of this answer is that there are four relevant human capabilities here: the ability to master details, the ability to quickly grasp what the salient issues are and follow them through to their conclusion, the ability to work like a dog, and the ability to size up people — figure out quickly who will actually produce something useful and who will not, who will hang tough and who will easily bid more, who will soften if wooed and who will stay hard-nosed. Next to nobody has all four or even three of these capabilities in world-class measure. Fewer people than you think have even two. And for someone who has one of the other three — mastery of detail or skill at analysis or the ability to work like a dog for ungodly periods of time — mastery of Chet-hood is a very valuable and lucrative skill.

I will put it less politely: Chet makes a lot more money than you because Chet is worth a lot more money than you. Chet the i-banker regularly spends his weekends drafting prospectuses; Chet the bond salesman often arrives at his office at 3 or 4 AM to trade the foreign markets. What time do you start work? Chet can probably do bond math and explain Black-Scholes. Can you? You have opinions on Wittgenstein, which Chet lacks; are you quite sure the opinions are worth having? Chet is not brilliant, to be sure; neither are you. Brilliant people produce brilliant work. Where’s yours?

The kernel of truth in your complaints is that the regulatory-cash complex protects the incomes of Wall Street, and Chet profits from this. But Chet decided early on that he wanted to trap money with a large net. He majored in economics and went to business school while you were dicking around with philosophy and Russian literature. While you sneered at all of your classmates who wanted to be doctors, lawyers, or investment bankers, Chet signed up for his interview with Morgan Stanley. He may be a welfare queen, and it is irritating that he will rarely recognize the fact; on the other hand, you likely work in academia, which is no stranger to tax dollars. You also, unlike Chet, frequently agitate for still larger subsidies, which annoys Chet as much as he annoys you, although he, unlike you, is probably too tactful to say so.

Yes, the world is full of rank injustices. No, your modest salary is not among them.


Apr 282004

An old joke has a grocer trying to explain business ethics to his son. “Suppose a lady comes into the store,” he says, “buys two dollars worth of merchandise, pays with a fifty, and leaves, forgetting to take her change. Here’s where business ethics comes in: do you, or do you not, tell your partner?”

Now a harder one, from real life. Suppose you own a second-hand store. You run profitable weekly auctions, the seller’s best friend, by gussying up a window with a few especially nice items and inviting customers to bid. One week you take two lamp bases, outfit them with new shades, and put them in the window, describing them, accurately, as lamps, not as valuable antiques. The lamps find two bidders, who both offer substantial amounts of money. As you wrap them for the winner you both notice price tags at the bottom of the bases, for an embarrassingly small amount, from an embarrassingly modern store. The winning bidder understandably balks at paying several times for the lamps what he would have paid for the bases and shades retail.

Here’s where business ethics comes in. What do you do? You can’t very well demand that the winner pay his bid, giving him a lecture on the subjective theory of value. It’s not gonna happen. Do you simply remove the tags and go to the underbidder, who hasn’t seen them? Are you obliged to tell the underbidder about the tags, which are now essentially public information? If you don’t, what do you tell the winner, now loser, when he comes back to the store, as he surely will, and asks what happened to the lamps? Do you have to tell him anything at all? Or do you ignore the underbidder and renegotiate a deal with the winner?

I honestly don’t know the right approach, and am curious what my readers think.

(Update: John Venlet comments.)

Mar 182004

My father asked me write about dollar-cost averaging, which is strange, since his own financial career is epitomized by refusing to buy an apartment in New York in the wake of Manhattan’s last great real estate crash in 1973, shrewdly choosing instead to commute two hours a day to his job in the city. Or maybe that’s exactly why he does want me to write about it. In any case, I take requests.

If you don’t know what dollar-cost averaging is, Ameritrade, Pax World Funds, American Century, or your local broker will happily inform you. It boils down to a syllogism:

Major Premise: You liked the stock at price x.
Minor Premise: Nothing has changed about the stock.
Conclusion: You should like the stock even more at price x – y. Buy more!

Perhaps the best example of the dollar-cost averaging pitch is from the eerily accurate movie Boiler Room, about penny stock hustlers, in which Seth Davis, crouching under his desk, cajoles a worried investor in a collapsing stock (propped up entirely by the schlockhouse in the first place) into buying more with a big pitch for dollar-cost averaging. E.F. Moody takes care to point out that “the price of the shares average [sic] out over time and can still produce an acceptable profit — assuming that the ending value of the shares is higher than the dollar cost average of monthly investing — not an absolute guarantee.” Which is right neighborly and responsible of them.

As to the merits of dollar-cost averaging, let me put this as tactfully as possible: there are none whatsoever. Either the stock is a good or bad buy now. Your previous purchases have as much bearing on your present purchase as previous rolls at the craps table have on whether to bet the line. To put it in terms of our syllogism, the minor premise is false. Something has changed about the stock: its price has gone down. As my father points out, if the price goes up, and you want to buy more, does your broker tell you discouragingly that you will raise your average price per share? I thought not.

The syllogism, however, is almost true. Stock represents something real, a percentage of ownership in a company that presumably, though not necessarily, has real assets and real value. If the customer had researched the company exhaustively, had kept his knowledge up-to-date, and had assured himself that the value of the company was higher than the stock price, then the syllogism would be valid. In truth, of course, the customer bought the stock because his broker or tennis partner advised him to. Such “knowledge” as he has is usually confined to the belief that Acme Industries is going through the roof. When Acme goes through the floor instead, not only has something he knows about the stock changed; everything he knows about the stock has changed. Since the customer never sees it this way, dollar-cost averaging can be expected to work forever. As an investment strategy dollar-cost averaging is absurd; only as a psychological strategy does its brilliance become manifest.

Besides being irrationally self-regarding, most people are irrationally risk-averse. They will sacrifice an excellent prospect of a large gain to avoid the possibility of a large loss. This, oddly, mitigates in favor of dollar-cost averaging, when you might think the opposite would be true. As long as the customer’s money is in stock, he can imagine it to be worth whatever he pleases, like a lottery ticket. Fantasy becomes reality when he converts it to cash. It is excruciating for most people to sell at a loss; when they call their broker they’re dying to be talked out of it. And so they are.

Buy more! Buy now! Buy more now!

Dec 222003

To understand the absurd seriousness with which Americans treat higher education, look at their cars. Jacques Steinberg’s The Gatekeepers, which trails a Wesleyan admissions officer and six supplicants for places in the class of 2004, documents this magic moment:

A week before his decision was due, he mailed off a $250 deposit and his official response to Wesleyan: a form that had “YES” preprinted in large type at the top. Jordan then went out to his mother’s car and pressed a clear Wesleyan decal against the inside of the back window.

Jordan’s palpable awe was correctly analyzed Paul Fussell, twenty years ago, in Class:

Americans are the only people known to me whose status anxiety prompts them to advertise their college and university affiliations in the rear windows of their automobiles. You can drive all over Europe without once seeing a rear-window sticker reading CHRIST CHURCH or UNIVERSITÉ DE PARIS. A convention in the United States is that the higher learning is so serious a matter that joking or parody are wholly inappropriate… One would sooner defile the flag than mock the sticker or what it represents by, say, putting it on upside down or slantwise, or scratching ironic quotation marks around “College” or “University.” I have heard of one young person who cut apart and rearranged the letters of his STANFORD sticker so the rear window said SNODFART. But the very rarity of so scandalous a performance is significant.

Fussell, notably, does not assign this behavior to a particular class, but to Americans in general. The college decal afflicts uppers, middles, and proles alike. And I sympathize: if I were about to piss away 150 large I might want a souvenir too. Status anxiety being what it is, I see only one answer to the college decal problem: stop sending kids to college.

College, as a phenomenon, has nothing to do with learning. It is possible to educate oneself at Ball State or at Harvard, or alone in one’s room for that matter, like young Jimmy Gatz, studying electricity from 6:15 to 7:15 every morning and needed inventions from 7:00 to 9:00 every night. It is equally possible not to educate oneself at any of those places. I should know: when Harvard turned me down I beat my breast and rent my garments. I then proceeded not to educate myself at my safety school, Carleton College, which served the purpose admirably, just as Harvard would have.

For certain subjects college facilities are useful; it’s tough to learn biology or chemistry without lab work. But Tiffany will be majoring in sociology, and Eustace in political science. They could read Erving Goffman and Tocqueville on their own time, and $150,000, apparently the going rate for four years at a top university, buys a hell of a lot of private tutoring. Perhaps the parents consider the money well-spent if it simply gets the brats out of the house.

No, college is about bragging rights, and seeing to it that your child has the best possible start in life. Children who attend prestigious colleges are understood, correctly, to have more career success. Here, however, we run into a little cause-effect problem. College admissions officers look for good grades and high test scores and a documented record of achievement; employers look for the same things. If no one went to college, or if the bottom went while the top worked instead, would the income disparity, ten years hence, really be any different?

The children themselves dispense with these niceties. Of the six in The Gatekeepers, each, for all of his oft-asserted independence of mind and spirit, decides to attend the most prestigious school he gets into (as determined by the U.S. News rankings, which the schools follow as assiduously as the children). The single exception is a girl who courageously spurns Harvard in favor of Yale.

Steinberg, who graduated Dartmouth in 1988, is not, himself, the best advertisement for the admissions officers of the Ivy League. (I include Wesleyan, which billed itself for a while as “The Alternative Ivy” and is still trying to live it down.) As a writer he is a diligent reporter. His special weakness is for the inconsequential appositive, for “color,” and The Gatekeepers is full of sentences like this: “For Terri, the mother of a ten-year-old girl and an eight-year-old boy, the idea of traveling to Asia for five weeks a year on Wesleyan’s behalf seemed like a perfect segue to the nearly three years she had spent in Swaziland for the Peace Corps.” Neither the girl nor the boy nor Swaziland ever reappears, for which, I suppose, a more generous reader would be grateful.

Causation gives Steinberg some trouble. One of the students he follows, Jordan Goldman, connives his way, Steinberg never says quite how, into writing lessons with the distinguished novelist Richard Price. Goldman’s best friend has cerebral palsy and is bound to a wheelchair. Steinberg writes, “In Freedomland Price had created characters based on both boys and made them brothers, because he knew how badly they wished they were brothers in real life.” Cosmic stupidity lurks behind that “because.” Early in the book his admissions officer, Ralph Figueroa, interviews at Goucher College and dislikes it because there’s no decent Mexican food. At the end Steinberg says that Goucher has finally passed “the Tortilla Test,” not by improving the food, but by appointing a Mexican-American dean. You begin to feel a little embarrassed for the guy on the one hand, and to wonder, on the other, what Dartmouth is letting in these days.

Imbecility has its uses, letting Steinberg tell what he sees without noticing that it directly contradicts what he believes. Steinberg and his admissions officer firmly believe in affirmative action, a conviction unshaken by the fact that the two obvious affirmative action admittees, an American Indian to Wesleyan and an inner-city Hispanic to Muhlenberg, both drop out freshman year. Ralph rhapsodizes constantly about the importance of “diversity” at Wesleyan; yet he never seems to encounter anyone, on or off campus, with politics to the right of Howard Dean’s. One applicant “was intrigued that so many students were vocal in support of various political causes,” as Steinberg puts it — I would say coyly, except it does not seem to have occurred to Steinberg that there is more than one kind of political cause.

The Gatekeepers also makes clear what admissions officers really do for a living, during the nine months of the year when they aren’t reading applications. They solicit. Ralph spends months on the road, traveling from high school to high school singing the praises of Wesleyan and encouraging applications that he has every expectation of turning down. More applications means more rejections, which means more “selectivity,” which means a higher rank in U.S. News. Nothing scandalous about that, but nothing edifying either.

Suspiciously little in the way of actual academics seems to go on at any of these colleges — especially Wesleyan, which resembles on Steinberg’s account less an institution of learning than a year-round Burning Man festival — but there is an awful lot of travel. The Cornell girl spends six months in a pueblo in Costa Rica and a month in Rome “to write and draw.” The NYU girl goes to Prague, Jordan Goldman goes to Oxford. Only the Yale girl stays put, leading rallies on behalf of her fellow oppressed Yalies, demanding that all college loans be forgiven. The old aristocratic Grand Tour was more effective and no more expensive.

So parents, that round-the-world cruise that you’ve been promising yourself? The money’s just sitting there, in Junior’s college fund; help yourself. It’s his year abroad or yours.

(Update: Craig Henry points to a study that shows a surprisingly weak link between college selectivity and income. Maybe I was too kind. James Joyner comments. Julie Neidlinger comments.)

Dec 072003

This place has gone to seed, in large part, because I’ve been doing some actual work, trying to get a software release out — late, inadequate, but out — and as a consequence have followed Floyd McWilliams’s and Evan Kirchhoff’s theorizing about the future of software with more than academic interest. Evan starts here, Floyd replies, more Evan, more Floyd, and finally Evan again. The question at hand is when all of our jobs shall be outsourced to Softwaristan (India), where they produce high-quality source code for pennies a day, and what we software developers shall be doing for a living when that happens. As Evan puts it, “Floyd says ‘decades,’ I say ‘Thursday.'”

And I say, with due respect to both of these highly intelligent gentlemen, that neither one has the faintest idea what he’s talking about. They are speculating on the state of a science seventeen years in the future, and if they were any good at it they wouldn’t be laboring, like me, in the software mines, but in the far more lucrative business of fortune-telling. I — and I suspect I speak for Floyd and Evan here too — would happily swap W-2s, sight unseen, with Faith Popcorn or John Naisbitt, and they’re always wrong.

Floyd compares the current state of software development to chemistry circa 1700, which is generous; I would choose medicine circa Paracelsus, the Great Age of the Leeches. The two major theoretical innovations in modern software are design patterns and object orientation. Design patterns and object orientation are, depending on how you count, ten and thirty years old respectively, which indicates the blazing pace of innovation in the industry. Design patterns mean that certain problems recur over and over again, and instead of solving them the old-fashioned way, from scratch every time, you write down a recipe, to which you refer next time the problem crops up. Object orientation means that software modules, instead of just encapsulating behavior (“procedural programming”), now encapsulate data and behavior, just like real life! Now doesn’t that just bowl you right over?

Hardware, by contrast, improves so rapidly that there’s a law about it. It is a source of constant reproach to software, which has no laws, only rueful aphorisms: “Adding people to a late software project makes it later,” “right, fast, cheap: choose two,” and the like.

Evan claims, notwithstanding, that “a working American programmer in 2020 will be producing something equivalent to the output of between 10 and 1000 current programmers.” Could be. He points to analogies from other formerly infant industries, like telephones and automobiles. He also cites Paul Graham’s famous manifesto on succinctness as power, without noting that Graham’s language of choice is LISP. LISP is forty years old. If we haven’t got round to powerful languages in the last four decades are we really going to get round to them in the next two?

Floyd counters with an example of an object-relational library that increased his team’s productivity 25-50%, arguing that “as long as development tools are created in the same order of magnitude of effort as is spent using them, they will never cause a 100 or 1000-fold productivity improvement.” Could be. Certainly if, as we baseball geeks say, past performance is the best indicator of future performance, I wouldn’t hold my breath for orders-of-magnitude productivity improvements. On the other hand, bad as software is, enormous sums are poured into it, large segments of the economy depend on it, and the regulators do not even pretend to understand it. This all bodes well for 2020.

Me, I don’t know either, which is the point. Evan works on games, which are as good as software gets; this makes him chipper. Floyd works on enterprise software, which is disgusting; this makes him dolorous. I work on commercial business software, which is in-between; this makes me ambivalent. We all gaze at the future and see only the mote in our own eye.

(Update: Rick Coencas comments. Craig Henry comments.)

Oct 042003

(I had a pleasant holiday from you, dear readers, and, I trust, you from me as well. Now let’s get down to it boppers.)

Toxicologists say that the dose is the poison, and Americans could save themselves millions of dollars if they only understood what that means.

Everything on earth, from arsenic to mother’s milk, is toxic if ingested in sufficient quantity. If we graph the lifetime dose on the x-axis and the chance of resulting loathesomeness on the y (what’s with me and the graphs lately?), we wind up with the risk curve. For your quotidian poisons like cigarettes, red meat, and smog, the risk begins at zero and stays very close to it until a certain dose is reached, at which point the curve inflects and the risk begins to increase quite radically. Not all risk curves have this shape, of course. For highly toxic substances like sarin or finely-ground anthrax it inverts. The risk escalates very rapidly and then flattens at the top of the graph after a certain exposure, at which point you die.

The curve, however, is always a curve, never a straight line. Have you heard that every cigarette you smoke cuts five minutes, or eight, or ten, off your life? This is the linear fallacy in full flower. Smokers’ diseases like emphysema and lung cancer concentrate overwhelmingly in the heaviest, longest-term smokers. People who smoke for a few years have scarcely higher mortality than people who never smoke at all. (You kids bear this in mind when you’re thinking of lighting up.) The first cigarette you smoke probably does you no harm at all. The 150,000th — pack a day for twenty years — may, like W.C. Fields’ Fatal Glass of Beer, be the one that does you in. The dose is the poison.

It gets worse. An intense dose over a short period is generally far more toxic than the same dose spread out over a lifetime. Risk varies radically not only with the lifetime dose, but also with its rate, which renders extrapolation effectively impossible. Animal tests classically deal with this fact by ignoring it. Suppose you want to determine the long-term risks of swilling pistachio nuts and maraschino cherries, which contain Red Dye No. 3. Time’s a-wasting, and you don’t have 50 years to conduct your research. Instead you stuff a bunch of gerbils with a whole lot of Red Dye No. 3 over a few weeks or months and see what happens. If a few gerbils get cancer, you extrapolate, bury your reliance on the linear model in a couple of footnotes, and voilà! a new carcinogen. Politicians and journalists thunder against the unacceptable risks to maraschino cherry addicts, the Delaney Clause is invoked, Red Dye No. 3 is banned, a new, slightly less attractive red dye replaces it, and the cycle begins anew.

Good-sized industries have sprung up to exploit the linear fallacy. The EPA tells gullible homeowners to shell out a couple grand to a radon-removal outfit if their radon level in their water is more than 4 pCi/I (picocuries per liter). Turns out that exposure at that level for 20 years increases the lifetime risk of cancer by less than 1%, unless you also smoke, which bumps it up to a ghastly 3% or so. Mind you, this is not increased mortality, but increased risk of cancer. Since the lifetime risk for cancer is in the 25% range, we’re discussing, in terms of overall mortality, something less than 0.3%. Save your money and try to stay out of automobiles instead.

The asbestos boys make the radon boys look positively public-spirited. Asbestos is dangerous if you spend your life working with it; non-smoking asbestos workers have cancer rates about five times the general non-smoking population. Asbestos is essentially harmless when it’s minding its own business insulating pipes. In 1985 the British epidemiologists Doll and Peto estimated the annual lung cancer risk from such exposure to be 1 in 1,000,000; other reputable estimates are similar. Yet the Asbestos Hazard Emergency Response Act, passed in 1987, mandated asbestos removal for 45,000 public schools, many with airborne asbestos concentrations no higher than the outdoors. When you remove asbestos improperly you stir it up and increase the exposure, and since removing asbestos properly is extremely expensive the incentive to do it improperly is immense. $100 billion or so later, overall asbestos risk is probably higher than it ever was. Lead paint, Alar, DDT: the song remains the same.

So there’s good news and bad news. The bad news is you’re going to die of something. The good news is that it almost surely won’t be an exotic environmental poison.

Sep 112003

MDMA, better-known as Ecstasy, has been shown to cause Parkinson’s Disease in monkeys if the monkeys had actually been getting MDMA. As it happens they were getting methamphetamine instead. Derek Lowe, himself a pharmaceutical chemist, eviscerates the authors politely, as a professional courtesy:

I’m sure that some people are going to point the finger at this group for not checking the samples of MDMA and methamphetamine. But I can’t fault them so much on that point. In vivo pharmacologists are not chemists, and aren’t expected to assay the samples that they’re dosing. In every drug research project I’ve been on, the animal folks make it clear that they depend on compounds being what the label says they are. They have no way to confirm it themselves. (In this case, Research Triangle Institute, the source of the samples, says that things were fine on their end, as you’d figure they would. Depends on where the label came from on that remaining methamphetamine sample, doesn’t it?)

But all that said, I have to then turn around and wonder why the original paper was published at all. I was surprised to learn that their results hadn’t been repeated beforehand. You’d think that this would be necessary, given the public health implications of the work and its variance with the results of others in the field. I can’t help but think that the researchers got their original data, thought they had a hot result that would make everyone sit up straight, and got it into publication as fast as they could.

I’m really taken aback to learn that they hadn’t looked at the original monkeys for MDMA levels before. Getting blood samples from monkeys is no easy task, but why wait until there’s a problem to do the post-mortem brain levels? Those numbers really would have helped to shore up the original results – and would have immediately shown that there was a problem, long before the paper was even published. I don’t like to sound this way, but it’s true: in the drug industry, we consider pharmacokinetic data like this to be essential when interpreting an animal study.

New scientific results are usually new because they’re usually wrong. Science approximates truth only because its results can be replicated. Scientists make mistakes and studies are shot through with error, though rarely so egregiously. You think science journalists might remember this tale next time they trumpet some “ground-breaking” result on the front page? Me neither.

There is a still larger lesson for my vast juvenile readership, who are possibly capable of learning something. Kids, this is very important: don’t do meth thinking it’s Ecstasy. For one thing, it means you got beat, which is embarrassing. For another, it’s linked to neurotoxicity and Parkinson’s Disease. In monkeys.

Jul 292003

You might be a junk scientist if:

You prophesy disaster in some remote future. It is safest to choose a date in the long run, when we’re all dead, but even the less judicious have little to worry about: by the time D-Day rolls around people will have forgotten what you said. If someone does happen to remember, you can either issue a new report revising your predictions, or, as a last gasp, maintain that you were right in general, even as your every specific prediction has been falsified. Or both.

You deal in poorly-understood, multi-causal phenomena, traditional playgrounds for the scientific crank. Cancer and climatology are especially popular.

You have trouble with extrapolation, like Ralph Hingson of the Boston University School of Health, who concluded that college drinking causes 1,400 deaths annually, by taking the total number of alcohol-related deaths among people 18-24 and multiplying by, uh, the percentage of them in college. (Note that this is supposed to establish that college drinking is especially dangerous.) Social science: it’s easy!

You are famous for work outside your field, like Paul Ehrlich, a bug man best-known for speculation on overpopulation and global cooling (yes, cooling); Barry Commoner, the cancer-biologist-cum-nuclear-testing-authority-cum-geneticist; Rachel Carson, an expert on chemicals by virtue of her master’s in marine biology; and Stephen Jay Gould, another genetics authority, trained in paleontology. The press, notwithstanding, can be relied on to refer to you as “Dr.,” “Ph.D.,” or “distinguished scientist.”

You do a lot of testifying for plaintiffs in class-action suits. Extra credit if this is how you make your living.

Jul 142003

I hate to disagree with the estimable Craig Henry over at Lead and Gold, and still more with Tom Wolfe, but Craig, in the process of taking pie-eyed Internet triumphalism to task, quotes Wolfe as follows:

I hate to be the one who brings this news to the tribe, to the magic Digikingdom, but the simple truth is that the Web, the Internet, does one thing. It speeds up the retrieval and dissemination of information, partially eliminating such chores as going outdoors to the mailbox or the adult bookstore, or having to pick up the phone to get hold of your stockbroker or some buddies to shoot the breeze with. That one thing the Internet does and only that. All the rest is Digibabble.

Well OK. All the Internet does is “speed up the retrieval and dissemination of information.” And this distinguishes it from the telephone, telegraph, and printing press — how, exactly?

(Update Craig Henry replies. He correctly points out that “technological advances do not automatically create business and social utopias” — indeed, they do not create them at all. Technology Whigs ought to ask themselves once in a while why the breathtaking technological progress of the 19th century was followed immediately by the bloodiest period in human history. But there is a long difference between making this point and doing what Wolfe does, disparaging the technology itself.)

(More: James Joyner comments.)

Jun 082003

Old joke. Q: How can you spot an intellectual? A: He’s the guy in the corner worrying about “the problem of the intellectuals.” The problem of blogging, then.

The principal lesson of blogs is that the market price for reasonably well-considered rumination is zero, and the competition for readers at that price is fierce. This understandably alarms people who are paid for ruminating — “thumb-sucking” in the argot — as opposed to reporting. It also explains both big-media hostility to bloggers, and concomitantly, blogger hostility to big media, columnists in particular. Maureen Dowd and Paul Krugman are regularly savaged by people who write as well as they do, think much better, and must wonder to themselves why Dowd and Krugman have highly-paid jobs at The New York Times while all they have is their damn blogs.

It is odd, and unprecedented, that people think they ought to be able to make a living doing what they enjoy. Back in the salad days of Spy magazine, its writers were paid almost literally minimum wage, and there were 50 people who were dying to work there for every one who did. Anyone who has taken a freshman economics course will tell you that these two facts are intimately related. (One of Spy‘s best writers was asked at his year-end review what he wanted in the coming year. “More money,” he answered. He went on to become a well-known TV producer and is now richer than Croesus.)

Michael Blowhard has an essay on the economics of book-writing that has inspired a fair amount of hand-wringing in the thread. He gives several reasons for writing a book, the most important of which is being “an obsessed lunatic.” It is to obsessed lunatics that we owe the greater part of the world’s permanent literature. For most of history authors not only didn’t make money from their work, but often risked their lives by publishing it. Although it is impossible to assess a counterfactual, I see no evidence that this seriously impoverished literature. To take an obvious instance, Russian literature flowered under conditions so harsh as to be nearly unfathomable. Thomas Gray may believe in “mute inglorious Miltons,” but I don’t. Neither does Ludwig von Mises, who essentially exempts art, or art worth having, from economic calculation:

The activities of [artistic geniuses] cannot be fully subsumed under the praxeological concept of labor. They are not labor because they are for the genius not means, but ends in themselves. He lives in creating and inventing. For him there is not leisure, only intermissions of temporary sterility and frustration. His incentive is not the desire to bring about a result, but the act of producing it. The accomplishment gratifies him neither mediately nor immediately. It does not gratify him mediately because his fellow men at best are unconcerned about it, more often even greet it with taunts, sneers, and persecution. Many a genius could have used his gifts to render his life agreeable and joyful; he did not even consider such a possibility and chose the thorny path without hesitation…

Neither does the genius derive immediate gratification from his creative activities. Creating is for him agony and torment, a ceaseless excruciating struggle against internal and external obstacles; it consumes and crushes him…

The creative accomplishment of the genius is an ultimate fact of praxeology. It comes to pass in history as a free gift of destiny. It is by no means the result of production in the sense in which economics uses this term.

The productivity of labor has become so high in this country that most anyone who has bothered to acquire some marketable skills and is not grimly devoted to his job is awash in leisure. Trollope, who produced 40-odd novels by arising at 4 AM daily and writing for two hours before his day job at the post office, would envy us. The Marxist fantasy of a people milking cows in the morning and practicing drama criticism at night has nearly come to pass, though not in the way that Marx intended. You want to make money and write in your spare time, be my guest. You want to make money writing, write romance novels or technical texts. You want to make money writing serious books about your cherished passions, go whine to someone else.

(Update: AC Douglas comments. The Digerati Peninsula comments.)