Economics – Page 188 – artdiamondblog.com

Workers Want to See Compensation Related to Contribution

This is a great example contra (or at least qualifying) Daniel Pink’s claim that all you need do for knowledge workers is provide them enough money so that they can provide for the basic needs of themselves and their family.

(p. 145) The public offering process brought details of the intended allocation of Pixar stock options into view. A registration statement and other documents with financial data had to be prepared for the Securities and Exchange Commission and a prospectus needed to be made ready for potential investors. These documents had to be reviewed and edited, and it was here that the word apparently leaked: A small number of people were to receive low-cost options on enormous blocks of stock. Catmull, Levy, and Lasseter were to get options on 1.6 million shares apiece; Guggenheim and Reeves were to get 1 million and 840,000, respectively. If the company’s shares sold at the then-planned price of fourteen dollars, the men would be instant multimillionaires.

The revelation was galling. Apart from the money, there was the symbolism: The options seemed to denigrate the years of work everyone else had put into the company. They gave a hollow feel to Pixar’s labor-of-love camaraderie, its spirit that everyone was there to do cool work together. Also, it was hard not to notice that Levy, one of the top recipients, had just walked in the door.
“There was a big scene about all that because some people got (p. 146) huge amounts more than other people who had come at the same time period and who had made pretty significant contributions to the development of Pixar and the ability to make Toy Story,” Kerwin said. “People like Tom Porter and Eben Ostby and Loren Carpenter–guys that had been there since the beginning and were part of the brain trust.”
Garden-variety employees would also get some options, but besides being far fewer, those options would vest over a four-year period. Even employees who had been with the organization since its Lucasfilm days a decade earlier–employees who had lost all their Pixar stock in the 1991 reorganization–would be starting their vesting clock at zero. In contrast, most of the options of Catmull, Lasseter, Guggenheim, and Reeves vested immediately–they could be turned into stock right away.
“I decided, ‘Well, gee, I’ve been at this company eight years, and I’ll have been here twelve years before I’m fully vested,’ ” one former employee remembered. ” ‘It doesn’t sound like these guys are interested in my well-being.’ A lot of this piled up and made me say, ‘What am I doing? I’m sitting around here trying to make Steve Jobs richer in ways he doesn’t even appreciate.’ ”

Source:
Price, David A. The Pixar Touch: The Making of a Company. New York: Alfred A. Knopf, 2008.
(Note: italics in original.)
(Note: my strong impression is that the pagination is the same for the 2008 hardback and the 2009 paperback editions, except for part of the epilogue, which is revised and expanded in the paperback. I believe the passage above has the same page number in both editions.)

For Daniel Pink’s views, see:
Pink, Daniel H. Drive: The Surprising Truth About What Motivates Us. New York: Riverhead Books, 2009.

Stevenson and Wolfers Find People in Rich Countries Are Happier

“Betsey Stevenson and Justin Wolfers are the go-to pair on what some might call “lovenomics,” having produced much research on marriage, divorce and child-rearing. They are shown at home with their daughter, Matilda, and family dog, Max.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 1) . . . when Ms. Stevenson, 40, and Mr. Wolfers, 39, start talking about say, diapers or nursing, the conversation takes an odd turn. Suddenly, words like “inputs” and “outputs” — the economic kind — creep in. Mention loading the dishwasher and he tosses out “fungibility.” The low cost of two big teddy bears they bought for Matilda gets Ms. Stevenson ruminating on productivity gains.

If they don’t quite sound like the rest of us, that’s because these two Harvard Ph.D.’s form a sort of power couple in the world of the dismal science, or at least a certain corner of it. Faculty members at the Wharton School of the University of Pennsylvania, and currently visiting fellows at Princeton, Ms. Stevenson and Mr. Wolfers have become the go-to pair on the economics of marriage, divorce and child-rearing. That they are themselves a couple — unmarried, for tax reasons they regularly cite — adds to the allure.
. . .
Their research shows that men have grown happier as women have become unhappier. (Why? They don’t really know.) Are people in rich countries happier than people in poor countries? (Yes.) And contrary to popular belief, they show that the divorce rate in America has been falling, not rising, for decades. They cite a number of possible reasons, including more balanced expectations between men and women about how a marriage will actually work, as well as the fact that fewer people are marrying in the first place.
. . .
(p. 4) LAST month, Ms. Stevenson and Mr. Wolfers presented new research into what is known as the Easterlin Paradox. First documented by the economist Richard Easterlin in the 1970s, this concept involves the link between economic growth and happiness. The idea is that, within a given country, people with higher incomes are more likely to be happy, and yet, for the most part, the average level of happiness doesn’t vary much from rich countries and poor countries. What’s more, as countries become richer, their populations don’t become happier.
Using a red laser pointer to highlight PowerPoint graphs, Ms. Stevenson told a group of economists, psychologists and other experts gathered at the Russell Sage Foundation on the Upper East Side of Manhattan that earlier research had failed to take into account that as people and countries grow richer, it takes a much bigger amount of absolute dollars to raise incomes, and thus happiness.
So while it could appear that increases in happiness flattened out after incomes reached a certain point, “the richer you are, the more dollars it takes to give you the same increase in well-being,” Ms. Stevenson said. “To get a 10 percent increase in income, you need more dollars than when you are poor.”

For the full story, see:
MOTOKO RICH. “It’s the Economy, Honey.” The New York Times, SundayBusiness Section (Sun., February 11, 2012): 1 & 4.
(Note: ellipses added.)
(Note: the online version of the review is dated February 11, 2012.)

“Dematerialization” Means More Goods from Fewer Resources

(p. C4) Economic growth is a form of deflation. If the cost of, say, computing power goes down, then the users of computing power acquire more of it for less–and thus attain a higher standard of living. One thing that makes such deflation possible is dematerialization, the reduction in the quantity of stuff needed to produce a product. An iPhone, for example, weighs 1/100th and costs 1/10th as much as an Osborne Executive computer did in 1982, but it has 150 times the processing speed and 100,000 times the memory.
Dematerialization is occurring with all sorts of products. Banking has shrunk to a handful of electrons moving on a cellphone, as have maps, encyclopedias, cameras, books, card games, music, records and letters–none of which now need to occupy physical space of their own. And it’s happening to food, too. In recent decades, wheat straw has shrunk as grain production has grown, because breeders have persuaded the plant to devote more of its energy to making the thing that we value most. Future dematerialization includes the possibility of synthetic meat–produced in a lab without brains, legs or guts.
Dematerialization is one of the reasons that Peter Diamandis and Steven Kotler give for the future’s being “better than you think” in their new book, “Abundance.”

For the full commentary, see:
MATT RIDLEY. “MIND & MATTER; The Future Is So Bright, it’s Dematerializing.” The Wall Street Journal (Sat., February 25, 2012): C4.

The book mentioned by Ridley is:
Diamandis, Peter H., and Steven Kotler. Abundance: The Future Is Better Than You Think. New York: Free Press, 2012.

“Mind-Your-Own-Business Cowboy Libertarianism”

“Gov. Matt Mead at a meeting in the Capitol in Cheyenne. A portrait of his grandfather Clifford P. Hansen, a former governor, hangs behind him.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A15) If Washington is broken and unable to lead — as millions of Americans believe, according to polls — then who is left to fill the void? Mr. Mead’s answer: States functional enough to soldier on through a time of dystopian crisis should be given the room to run. Whether they are led by conservatives or liberals does not matter so much, he said, as the ability to get things done.

“There certainly have to be national policies, and national rules and regulations — I understand that,” Mr. Mead, 49, a Republican and former prosecutor, said in an interview in his office here. “But I am in part a states’ rights guy because I think we can do so many things better.”
Better or not, Wyoming’s way — always idiosyncratic in the windblown, rural grain that mixes mind-your-own-business cowboy libertarianism and fiscal penny-pinching — is getting its moment in the spotlight.

For the full story, see:

KIRK JOHNSON. “STATEHOUSE JOURNAL; Idiosyncrasy Runs Deep in the Soil of Wyoming.” The New York Times (Fri., November 25, 2011): A15.
(Note: the online version of the story is dated November 24, 2011.)

Benefits of Driverless Cars Justify Changing Liability Laws

“The car is driven by a computer that steers, starts and stops itself. A 360 degrees laser scanner on top of the car, a GPS system and other sensors monitor the surrounding traffic.” Source of caption and photo: online version of the WSJ article quoted and cited below.

(p A13) Expect innovations that change the nature of driving more than anything since the end of the hand-crank engine–so long as the legal and regulatory systems don’t strangle new digital technologies before they can roll off the assembly line.
. . .
Mr. Ford outlined a future of what the auto industry calls “semiautonomous driving technology,” meaning increasingly self-driving cars. Over the next few years, cars will automatically be able to maintain safe distances, using networks of sensors, V-to-V (vehicle-to-vehicle) communications and real-time tracking of driving conditions fed into each car’s navigation system.
This will limit the human error that accounts for 90% of accidents. Radar-based cruise control will stop cars from hitting each other, with cars by 2025 driving themselves in tight formations Mr. Ford describes as “platoons,” cutting congestion as the space between cars is reduced safely.
. . .
Over the next decade, cars could finally become true automobiles. Our laws will have to be updated for a new relationship between people and cars, but the benefits will be significant: fewer traffic accidents and fewer gridlocked roads–and, perhaps best of all, young people will be in self-driving cars, not teenager-driven cars.

For the full commentary, see:
L. GORDON CROVITZ. “INFORMATION AGE; The Car of the Future Will Drive You; A truly auto-mobile is coming if liability laws don’t stop it.” The Wall Street Journal (Mon., March 5, 2012): A13.
(Note: ellipses added.)

“A Greek, an Italian and a Spaniard Walk into a Bar”

(p. A15) A joke making the rounds: A Greek, an Italian and a Spaniard walk into a bar. Each orders a drink. Who pays? The German.

For the full commentary, see:
DAVID WESSEL. “CAPITAL; For Europe, a Lehman Moment.” The Wall Street Journal (Thurs., December 1, 2011): A15.

“Being Able to Work on a Great Project”

(p. 133) Recruiting was brisk; the magnet for talent was not the pay, generally mediocre, but rather the allure of taking part in the first fully computer-animated feature film. “Disney gave us a very modest budget [$17.5 million] for Toy Story,” Guggenheim said. “Although that budget went up progressively over time, it didn’t afford for very high salaries, unfortunately. We tried to make the other working conditions better. Just the enthusiasm of being able to work on a great project is as often as not what attracts artists and animators.”

Source:
Price, David A. The Pixar Touch: The Making of a Company. New York: Alfred A. Knopf, 2008.
(Note: italics and brackets in original.)
(Note: my strong impression is that the pagination is the same for the 2008 hardback and the 2009 paperback editions, except for part of the epilogue, which is revised and expanded in the paperback. I believe the passage above has the same page number in both editions.)

Quantum Computers May Revolutionize Nanotechnology and Drug Design

“Scott Aaronson.” Source of caption and photo: online version of the NYT commentary quoted and cited below.

(p. D5) When people hear that I work on quantum computing — one of the most radical proposals for the future of computation — their first question is usually, “So when can I expect a working quantum computer on my desk?” Often they bring up breathless news reports about commercial quantum computers right around the corner. After I explain the strained relationship between those reports and reality, they ask: “Then when? In 10 years? Twenty?”

Unfortunately, this is sort of like asking Charles Babbage, who drew up the first blueprints for a general-purpose computer in the 1830s, whether his contraption would be hitting store shelves by the 1840s or the 1850s. Could Babbage have foreseen the specific technologies — the vacuum tube and transistor — that would make his vision a reality more than a century later? Today’s quantum computing researchers are in a similar bind. They have a compelling blueprint for a new type of computer, one that could, in seconds, solve certain problems that would probably take eons for today’s fastest supercomputers. But some of the required construction materials don’t yet exist.
. . .
While code-breaking understandably grabs the headlines, it’s the more humdrum application of quantum computers — simulating quantum physics and chemistry — that has the potential to revolutionize fields from nanotechnology to drug design.
. . .
Like fusion power, practical quantum computers are a tantalizing possibility that the 21st century may or may not bring — depending on the jagged course not only of science and technology, but of politics and economics.

For the full commentary, see:
SCOTT AARONSON. “ESSAY; Quantum Computing Promises New Insights, Not Just Supermachines.” The New York Times (Tues., December 6, 2011): D5.
(Note: ellipses added.)
(Note: the online version of the commentary is dated December 5, 2011.)

Innovative Entrepreneurs Need to Be Able to Fire People

(p. 116) Jobs met with the remaining employees soon after the layoffs and brought his reality distortion field with him. “You’re seeing your friends packing their stuff up and pushing it out to their cars,” Phillips remembered, “and yet somehow he had convinced you that that was the greatest possible thing that could happen.”
Within the Silicon Valley community, the talk was not of the way Jobs had handled his former employees at Pixar, but of his having kept Pixar going at all. It seemed to make little sense from a business point of view. For all his bravado about RenderMan, his motivation was likely a matter of status as much as economics. After his rise and fall at Apple, the onus was on him either to create another success story or to leave his peers to conclude that the first one had been a quirk of fate.
“It wasn’t really working,” Smith said of Pixar’s early years. “In fact, that’s being kind of gentle. We should have failed. But it seemed to me that Steve just would not suffer a defeat. He couldn’t sustain it.”

Lower Grades for Male Spectators When Their Team Wins

(p. C4) Big-time college-football teams may build school spirit, but they also hurt the grades of male students in the bleachers–at least when the teams are winning, a study suggests.

Economists at the University of Oregon tracked the grades of students there (athletes on all teams excluded) from 1999 through 2007, mapping them against the record of the Ducks, whose fortunes varied from season to season.

For the full story, see:
Christopher Shea. “Week in Ideas: Education Dumbed Down by Football.” The Wall Street Journal (Sat., December 24, 2011): C4.

Paper summarized:
Lindo, Jason M., Isaac D. Swensen, and Glen R. Waddell. “Are Big-Time Sports a Threat to Student Achievement?” NBER Working Paper # 17677, December 2011.

Simple Heuristics Can Work Better than Complex Formulas

(p. C4) Most business people and physicians privately admit that many of their decisions are based on intuition rather than on detailed cost-benefit analysis. In public, of course, it’s different. To stand up in court and say you made a decision based on what your thumb or gut told you is to invite damages. So both business people and doctors go to some lengths to suppress or disguise the role that intuition plays in their work.
Prof. Gerd Gigerenzer, the director of the Max Planck Institute for Human Development in Berlin, thinks that instead they should boast about using heuristics. In articles and books over the past five years, Dr. Gigerenzer has developed the startling claim that intuition makes our decisions not just quicker but better.
. . .
The economist Harry Markowitz won the Nobel prize for designing a complex mathematical formula for picking fund managers. Yet when he retired, he himself, like most people, used a simpler heuristic that generally works better: He divided his retirement funds equally among a number of fund managers.
A few years ago, a Michigan hospital saw that doctors, concerned with liability, were sending too many patients with chest pains straight to the coronary-care unit, where they both cost the hospital more and ran higher risks of infection if they were not suffering a heart attack. The hospital introduced a complex logistical model to sift patients more efficiently, but the doctors hated it and went back to defensive decision-making.
As an alternative, Dr. Gigerenzer and his colleagues came up with a “fast-and-frugal” tree that asked the doctors just three sequential yes-no questions about each patient’s electrocardiographs and other data. Compared with both the complex logistical model and the defensive status quo, this heuristic helped the doctors to send more patients to the coronary-care unit who belonged there and fewer who did not.

For the full commentary, see:
By MATT RIDLEY. “MIND & MATTER; All Hail the Hunch–and Damn the Details.” The Wall Street Journal (Sat., December 24, 2011): C4.
(Note: ellipsis added.)

A couple of Gigerenzer’s relevant books are:
Gigerenzer, Gerd. Gut Feelings: The Intelligence of the Unconscious. New York: Penguin Books, 2007.
Gigerenzer, Gerd. Rationality for Mortals: How People Cope with Uncertainty. New York: Oxford University Press, USA, 2008.