PicoBusiness

An interesting showdown is brewing. On the one hand, we have various surveys and forward-looking price indexes indicating a recovery is in process (Mark Perry is one of the regular trackers of these)

On the other hand, we have “mechanics” who look at more micro-level specifics, and see nothing but woe.

I think both groups are smart people with good ideas and intelligent, rational perspectives. But I don’t see how they can both be right.

We’re seeing a lot of consumer optimism, and optimism can be more powerful than the fundamentals. But it is also easier to lose optimism in the face of bad news.

So what’s going to happen next? Will shamanistic optimism “magick” the fundamentals into shape? Or will dour fundamentals crush the shaman’s spirit-calling, and plunge us into a double-dip recession?

My theory: I think the economy will get somewhat better, and then stagger a bit, with a very slightly positive growth rate for the next several quarters. Both sides will declare victory.

Yes, I admit it – I get obsessed about specific topics, and talk about them for a while before I stop. Right now, I’m enjoying the ideas and concepts behind the Culture.

When I stop to think about it, I think I like the Culture novels because he seems to have most of the same writing preferences as I do – concepts & plot over characters and motivation over dialog and nuance. In other words, his books are rich with ideas, have a plot to move the story along, but the characters aren’t well-defined, aren’t very subtle and the dialog isn’t great.

(One of the reasons I adopted the “Song of Ice and Fire” technique for my Stone Magic books is that it forced me to focus on characterization more than I would normally.)

In any case, the more I think about it, the more I notice the similarities between the Culture and the Federation.

• Both seem to have little-to-no-need for money (this is especially true in STNG)
• Both have their “best and brightest” involved in interactions with aliens (Starfleet Academy vs. “Special Circumstances”)
• Both seem to focus on peaceful expansion

The main differences:

• The Culture seems to have no Prime Directive
• The Federation has only minimal AI (specifically: Data)

Data is almost a perfect prototype of the Culture’s AIs – he is very smart, but very caring about the meatbags around him. If you assume that Data was able to hack his own mind to make himself smarter, which led to new discoveries to make himself even smarter, and then smarter still, he would have exactly the right type of temperament to become the template for the kind god-Minds that (essentially) rule the Culture.

The Culture novels are unapologetically socialist. And why not – if everyones needs can be satisfied at essentially zero cost, and 99.9% of wants can be satisfied in the same way, the concept of scarcity goes out the window, and free markets are designed to manage the use of scarce resources.

So many of the people in the Culture use artificial scarcity to help signal their awesomeness. For some reason, I thought of that just now.

Is there anything it can’t do?

I’ve read studies that suggest that first children have more ability to hold delay gratification than later children. And that they are generally more successful.

Heh. When you make a career out of predicting the same bad thing over and over again, someone eventually calls you on it.

http://paul.kedrosky.com/archives/2009/05/lester_brown_on.html

how many times do doomsayers have to be beaten with the “innovation breaks your paradigm” stick before they learn to stop sounding so confident?

If this is real (i.e. not a fake), I find it deeply distressing. More for the precedent it sets than for any particular sympathy for Mr. Frey.

We are complicit in the forging of our own shackles.

Interesting article on user-created content in MMOs (Massively Multiplayer Online games).

I wrote a MMO back in 1990-93 (although it stood for Modestly Multiplayer Online back then), and I play one today, so I feel I have some level of authority on the subject, even if it is dated.

The fundamental problems with most, if not all MMOs are:
1. that there is an unlimited supply of experience and treasure.
2. that there is no price adjustment as a reflection of demand.

Problem #1 is structural – you want everyone to have fun, so you don’t create artificial limits on how often one can acquire treasure, other than the universal constraint of time (i.e. it takes a certain measurable amount of time to accomplish anything).

Problem #2 is simply poor strategic thinking.

And it is the combination of these two issues that make MMOs subject to hyperinflation and min/max quests/treasure runs. You can’t really solve the first problem without annoying the ever-living crap out of your users (you mean I have to wait in a queue to get my chance to earn XP?).

But there is a straightforward fix to problem #2. Vary the reward for a given quest based on its popularity. Generally, there are two kinds of rewards:

• Advancement (Experience)
• Treasure (or Equipment)

Historically, most MMOs offer the concept of quests, and a quest has an Experience reward and/or a Treasure reward. It takes a certain amount of time X to complete a quest, and that is your only constraint. User-generated content is just the same – but users, being devious, make their content faster (i.e. reduce X) for a given amount of reward.

The key is to change the amount of reward, based on how often the quest is run – quests that are run often should have dynamically reduced Experience and Treasure rewards. Yes, it’s a bit complicated, but it is stable in the long term. Your “exploitative” quests are so popular that the XP and treasure rewards drop precipitously, and, voila, it’s no longer a popular quest.

You can also work this in reverse – quests are seldom (if ever) run can be dynamically increased in the quality of XP and treasure, until they become more popular. Balance is achieved, and the world is in harmony. Regardless of how easy or hard your quests are relative to each other, the players will themselves cause the game to balance, based on their own criteria.

It will almost be like an invisible hand, balancing your game on your behalf.

Sage advice from the far, far distant past.

*update* – it turns out “Disasterotica” is already used, so I will modify it:

Financial Disasterotica

You know – the bold and confident predictions of an utterly catastrophic failure of the United States. Especially when these predictions are florid and explicit in detail, as if the author wants the reader to be drawn in to the disaster, to become one with it emotionally, and share its thrills and chills.

Inspired by this article, specifically, although this is but one of dozens I’ve read in the last few months.

Are Net Generation kids more libertarian?

In my experience, younger people are more individualistic and freedom-loving in general – although they definitely also seek to limit the freedoms of “the other” – woe be unto you if you fall into that category.

But then they grow up, and they compromise on a million different things, and they stop feeling so intensely about those things.

Will markets remember that Obama bailed out the UAW and gave everyone else the shaft?

My prediction:

Of course they will, for about 15 years. And during that time, if you are a company that relies heavily on unionized labor, you will have a hard time finding private loans at reasonable interest rates.

However, if you are fortunate enough to have need of loans when a Democrat is president, you can safely assume that the government will loan you money… which you will not need to repay. If that money isn’t sufficient, and you fail, the government will simply hand control of the company over to the union, and loan it a bunch more money to “get it back on its feet”.

If the company is still struggling to actually make something people want to buy at a price that they are willing to buy at after that money runs out, the government may give it more money, or it may throw in the towel and give up on it. Hard to say at this point.

This is one of those frustratingly silly thought experiments that drives me around the bend.

The idea that its rational to discount your bid only applies as long as you can possibly make more money using the discounting strategy. Once you have discounted yourself below that floor, it’s perfectly rational to stop and say “He may get more money than me, but I will get at least X and X is > 2″

Specifically:

I consider $100, and Paul considers any number at all. If he chooses $100, I get $100. If he chooses $99, I get $98.

So there’s my floor – I should not rationally choose a strategy that can possibly net me less than $98 dollars. So then I consider $99 – if Paul chooses $100, I’ll get $101, but if he chooses $98, I’ll get $97.

So that’s it. I might in theory do better if I dropped down a notch, but I might also do worse, since I can’t predict Paul’s behavior (assuming I can predict Paul’s behavior is the height of hubris, and the essence of why the Traveler’s Dilemma is so silly). Since I don’t have to choose any strategy that nets me less than $98, why bother? I bid $100, and whether I get $100 or $98, I have chosen a path that is maximal in the average case ($99). Choosing $99 also results in $99 in the average case, but the spread is higher, and why would I increase my volatility in such an uncertain environment?

The fact that the author indicts game theory and free market economics on the basis of the counter-intuitive “rationality” of the Traveler’s Dilemma is (to me) the most telling part of the article.

Irony abounds. It is good that they are safe!

Do you like ice cream? Why aren’t you eating it right now?

Did you get any bad news earlier this week? Why aren’t you already dead by suicide?

The answer to both of those questions is the same – Because there are lots of other things to consider.

There’s news of late that there’s potential for an economic recovery in the near future. That’s good news. And when the good news comes out, the vultures of Armageddon pour out of the clouds.

“But banks are still struggling! But manufacturing is still down! But Swine Flu! But unemployment! But ARM rate resets! But government inflation! But the housing glut! But the foreclosures!” There are lots of bad things out there – the system is not 100% healthy. The bears point to this bad news, and scoff at the concept that there could be a recovery.

Speaking only for myself, I find this attitude frankly, a bit silly.

There is always bad news. All the time, there are always a number of bad things going on in the economy. There are pockets of illness, areas of concern, cones of weakness. Economies are never 100% healthy. If you’re looking for reasons to be pessimistic, you can always find them.

I admit – I am an optimist – I look at the bad news, and the good news, and the history of the world, and I weigh them and I feel like we’re on a general upslope. There will be down periods, and it is possible that the current upswing is just a bear-market rally.

On the other hand, the fact that the term ‘bear market rally’ has entered the common language suggests it is overdone. Pretty much by definition, the actual recovery will be a surprise to a lot of people who are still expecting the other shoe to drop. Just like every downturn is a surprise to a lot of people who are betting heavily on the next “sure thing”.

I’ve made a habit of grabbing dire predictions, and posting them to myself 3-6 months later on futureme.org – it’s a great way to gauge the sense of predictability. All of the dire ones have been horribly, horribly off. Many of them predicted rioting in the streets and a collapse of the dollar. Many predicted government near-collapse, hyperinflation and the complete paralyzation of credit. These things didn’t happen.

Others looked at various economic indicators and said ‘based on previous recessions, when X goes above Y, the recession typically ends in 3-9 months.” And now we’re hearing more and more people echoing that sentiment – that the recession will be over in the summer or fall. So far, those seem to be winning.

Bears laugh, and point to all the bad things. But it’s unrealistic to assume that bad news kills the market – growth has been occurring for many, many years despite bad news. There’s only a few times when enough bad things pile up and kill everyone’s optimism at once. And eventually, a few of those things go away, and optimism starts accumulating again.