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Sunday, August 19, 2001
Identity, Depression, Obsession
I don't know why I just titled this entry that. I wonder what I'm planning to write? Let's find out:
I've been feeling stupid for a few days about this robotics idea because it occurred to me that the parameter which I thought I was optimizing by doing one thing was in fact just going to add up exactly the same by the time I was done. In short, my original intuition was stupid.
But Garrett* and I ran the numbers today and it turns out I was right after all! So now I can feel stupid for thinking the original idea was wrong.
Of course, it's cool that it works -- at least on paper. I look forward to trying it out some day. It could lead to the world's first agile robot. Agility is sorely lacking in robotics.
I wonder, though, if anyone will be impressed when it happens, because by then we'll all be so used to seeing agile robots in the movies.
Still, it's got to be different having one run up to you in real life. Especially if it has big fangs. Heh heh.
Another item that's been zapping my happy juice is this email I've been composing for a list I'm on. I keep re-reading it and realizing there's a big gaping hole in one aspect or another, and so I get depressed about it and set it aside, and then I wake up the next morning and realize it's actually right and just such-and-such chain of factors shows why it's not a gaping hole after all. Who needs critics? I can argue with myself just fine, it seems. But for every victory, I have the corresponding failure to endure. I guess that's the advantage of arguing with other people -- if you do it right, they get to make all the stupid claims so you don't have to.
The email is about economics, specifically about economic growth. I don't know that I'll ever send it, but here is the most interesting idea that bubbled up in the process of arguing with myself over it:
When we think of productivity, we usually just think in terms of putting out some effort, and creating some value as a result. The default implication is that the magnitude of that value is, roughly speaking, in proportion to the effort exerted.
My claim, instead, is that productivity is the product of effort and capital (up-front value)--that in fact we are using our effort to leverage capital into more capital. At first this sounds like I'm just talking about sit-on-your-ass investing--so what, big deal. But that's just it--I think this applies across the board, all the way down to running through the woods with a grape leaf and a spear. And, for me at least, it adds some intuitive sense to many things, from economic growth, to the ramifications of being a billionaire, to the disparity in currencies between countries.
The fundamental observation behind this is that all productivity requires consumption--even if you're running through the woods with a spear, you need to burn calories to keep moving, and you need the spear and the grape leaf (ok, maybe not the grape leaf). And most importantly, you need to consume these things before you produce anything (mmmm, chicken) -- even if sometimes only slightly before.
So productivity and "investing" are inseparable -- what you consume is the investment, and what you produce is the return, whether more or less than the original investment. In fact, I would say that productivity is the act of controlling capital in such a way as to produce more capital, where "capital" here is essentially synonymous with "property" or "value", and includes such things as your own body.
Your body is a good illustration of the next key point: the more capital you are controlling, the more new capital you can produce. With two hands, you can do more (in the same time) than you can with just one. And with a spear, you can do more than just with your bare hands. And with a bazooka, you can do more than just with a spear.
And this is what technology is--a container of capital, or our method of controlling more and more capital at the same time. We might have started by hunting with rocks--a relatively cheap up-front investment. In theory, if we invest two rocks, we ought to be able to kill two cute furry animals at the same time. But in practice our ability to control more than one rock at a time is limited. So instead of collecting rocks, we might invest the same time into making a spear. The spear costs more, but it is also worth more because it enables us to produce more.
Enter growth. Capital growth happens any time we produce more than we consume. Further, realizing that our productivity is just a leveraging of capital, we can invest our new capital in the service of our productivity, and we have exponential growth.
Note that I've made no reference to exploiting workers in Taiwan. Exponential growth of capital is fundamentally possible for a single controlling individual with limited capacity, by progressively re-packaging his increasing capital in more controllable forms (the process we call technology).
There's essentially no limit to this process, and the capital we each own today is exponentially more valuable than what we would have had in the past. The television in your living room is worth a lot of rocks. We are all millionaires by standards of not long ago at all; but our capital is all so condensed and easy to control, we take it for granted. Plus there's the fact that we're all millionaires, which means everybody's time is leveraged by a huge investment of capital (cars, telephones, computers, machines, tools, technology!) and hence everybody's time is worth more than before too. So while we all have lots of stuff (more than we realize), we still can't buy each other's time cheap.
Or can we?
Currency exchange rates are largely reflective of just this: how much capital on average is a man-hour of time leveraged by in one country verses another? This difference of per-capita capital translates directly to a difference in per-capita productivity. Not because more or less effort is being exerted, but because productivity is the product of effort and invested capital.
Likewise, a billionaire in this country has a fundamentally different leverage on his productivity, in a way not so different from our own leverage vs. that of a cave man. The difference in the billionaire's case is that he is surrounded by people with less leverage, and thus he gets a good deal when buying other people's time, in just the same way we get a good deal when buying someone's time in a poorer country. Also, the billionaire's exceptional position within society means that technology has not caught up with him to help him control his capital (perhaps, for instance, some day the same amount of capital could be converted to a space ship with a holodeck and a materializer).
But machines and tools are not the only forms of technology. Businesses, or hiring people in general, is also a form of technology -- it allows us to control our capital in a way that produces more capital, albeit in a rather more indirect manner. The principle remains the same, however -- it is our choice for where to invest our capital that determines what and how much it will produce (averaging out luck and such), just as when we first chose to invest in a spear instead of collecting more rocks.
So when does it make sense to accept investment, take a loan, or even just to be paid a salary? When our capacity to control capital productively, given current technology, exceeds the capital we currently control. Here we are the perfect match for someone with more capital than they can control--we strike a bargain, sell our time as a controller of capital, become the technology.
An interesting "ethical" aside here is that in a sense it doesn't matter whether we invest in our own productivity or someone else's, all other things about us being equal. If Sam and Joe both work all year and have yearly productivity factors of 1.2 (meaning they can each produce 20% more capital than they consume in a year), then if Sam has $X of extra capital to leverage, he can add it to his own capital or he can loan it to Joe to leverage for him, and in either case he profits the same for no extra work for either Sam or Joe. I.e., just because Joe produced it doesn't inherently mean Joe deserves it. For instance, if Sam and Joe start out on equal footing, but Sam spends his last shells on a stick, a sharp rock, and some string, and Joe spends his on some beer and a dull rock, then when it comes time to hunt, Sam will be more productive because he invested more and consumed less. If on a whim Sam and Joe decide to trade tools for the day, assuming they are both equally good hunters with the same tools, it would only make sense if they also agreed to swap catches at the end of the day. I.e., all other things being equal, the product of capital belongs to the capital owner, not the producer! (But don't forget that one's body, and even one's knowledge count as capital, so even if the producer enters an endeavor empty-handed, they are still contributing capital and thus own part of the resulting product. If you give someone $1 with which they produce $1.20, their productivity factor is not 1.2, and you don't deserve the $.20 -- their body and knowledge may be worth $1 too, in which case they turned $2 into $2.20, with a productivity factor of 1.1, in which case you each deserve a profit of ten cents.)
Finally, note that the root of exponential capital growth is consuming less than we produce, and re-investing the difference in future productivity (whether our own, or someone else's). Part of the challenge here is in continuing to find ways to control and leverage the resulting ever larger amounts of capital, and that is the role of business, markets, and technology.
These principles apply equally well to individuals, to business entities, or to nations. And the failure mode is the same in all three: When excess income is consumed instead of re-invested, there is no growth. Consumer spending, while it may boost revenues of our consumption-oriented markets in the short term, is not conducive to long-term growth. Consumer saving and investing creates growth, by keeping capital in the service of production. (Production of what? An ever growing hierarchy of technology in support of only the bare necessities, in the extreme case. Maximal growth is not necessarily maximal happiness!) Socialism and excess taxation, which encourage consumption and discourage production, consequently hinder growth and hence technological progress.
I think I've run out of random thoughts to add.
But geeze, how's that for an off-the-cuff treatise? I'm afraid to go back and read what I just wrote in case I should start finding gaping holes in it and just depress myself again. I think I'll just post this before it's too late.
Geeze, it's late.
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