tdaxp predicted the Russian invasion of Ukraine

If Barack Obama and others had read my blog on October 29, 2008, they would have known that Russia will invade Crimea to turn it into a frozen conflict.

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Russia is not a European country.  it is a Central Asian oil exporter that has invaded Europe — again. A variety of moves, from pushing renewable energy to helping Ukraine sign the Association agreement with the European Union, should now be made. Ukraine must join Europe.

Too bad I was ignored.

The “Free Parking” Analaogy in International Relations

In business strategy, it is common to subsidize a money losing business that in order to make a primary business profitable. This is called “free parking.”

For instance, McDonalds is one of the largest parking lot operations in the world. The scale of their investment in an international network of places to park your car is staggering, involving professional and operational employees and contractors all of the world.

But McDonalds is not in the parking business. They are in the hamburger business. But absent providing “free parking,” McDonalds would find the cost of customer acquisition painfully high and the economics of scale from its operations too small.

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Of Interest to Parking Lot Operators

Likewise, the United States runs one of the largest carbon-economy rollback operations in the world. The scale of US investment in preventing the success of the carbon economies (from “King Cotton” in the late 19th century to “King Oil” in the late 20th century to King Natural Gas today) is staggering. This anti-carbon-intervention — from a massive climate science masquerade to military actions in the American South and the Middle East.

In most of the world most of the time, carbon-based economies are naturally despotic and authoritarian. These “hydraulic empires” exist because of the government monopoly over the infrastructure needed to extract wealth from the earth. This form of social organization can be internally stable but maintain considerable freedom of movement in international relations because rules do not need worry about complicated economic links that limit non-carbon economies. That is, they are warlike.

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Of Interest to Carbon Extraction Operators

(Whether refers to carbon-economy rollback by that name, or says something about sustainable political-economic growth, or “shrinking the gap” or whatever, the meaning and the concept is the same: minimizing the political and military importance of carbon extraction throughout the world.)

Rolling back the carbon-based economy is to the US what free parking is to McDonlads. For McDonalds, free parking is the side business and selling hamburgers is the main business. For the US, carbon-economy rollback is the side business and selling security is the main business. McDonalds could not afford the customer acquisition cost, and could not enjoy the economies of scale, without subsidizing free parking for its customers and potential customers. Likewise, the US could not afford the country-acquisition cost of its military alliances nor enjoy economies of scale, without subsidizing carbon-economy rollback for its customers and potential customers.

My friend Dr. Samuel Liles thinks that free parking is a distraction, whether for McDonalds in a shopping mall or the US in the world political system. He’s wrong on both points.

McDonalds cannot provide hamburgers (in exchange for cash) without providing parking, for free.

The US cannot provide security (in exchange for power) without rolling back the carbon-based economy, for free.

Free Parking and Ukraine

May good friends Dr. Samuel Liles (who I had the pleasure of meeting in person the other day) has taken to twitter to advocate to an isolation response to Russia’s invasion of Ukraine’s Crimea.

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Sam has written a tweeted a number of times, but this tweet is probably the most concise description of a pro-Putin line you’re likely to see in the non-lunatic West:

If you say “POTUS should do something” I’ll ask you why. Ukraine wasn’t in NATO or EU so NATO & EU shouldn’t do anything absent specifics.

I like Sam, he has a lot of cool stories and is a serious guy, but his comment is an exact analog to

If you say “McDonalds should provide parking” I’ll ask you why. Customers aren’t yet in the building so McDonalds shouldn’t spend money on them absent specifics.

The common thread in my friend’s Sam’s comments on Ukraine, and that crazy comment about McDonalds, is called “free parking.” Most successful enterprises, whether business or governments, provide subsidized or free secondary services in order to acquire customers for their primary services.

McDonalds runs one of the largest parking lot operations in the world, not because they are in the business of running profitable parking lots, but because the parking “business” is actually critical infrastructure to being successful in the restaurant business.

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Similarly, the US has traditionally supported the expansion of the European Union, not because the US is in the EU, but because the Eu is critical infrastructure to being successful in the security business.

The European Union, like the United States, has a political-military system that focuses on extracting taxes from producer surplus of the non-carbon sectors of the economy. An interesting result of this is that the EU and US focus on peaceful relationships with each other, as economic integration allows the economies of scale in multiple sectors necessary to increase the tax base thru increasing the producer surplus of the non-carbon sectors of the economy. Besides the first-order economic gains of this “capitalist peace,” this also provides second-order gains as the costs of the US of providing security are lowered.

Supporting the EU’s provisioning of that political-economic infrastructure throughout Europe is in America’s interests, in the same way that paying parking lot pavers is in McDonald’s interests. The US is not the EU. McDonalds is not a paving company. But McDonalds is in the paving business in order to provide free parking to its customers. And the US is in the business of supporting the expansion of the EU to provide free parking — access to the legal, technical, and economic infrastructure the EU provides — to its customers.

Review of “North Korea in Transition: Politics, Economy, and Society,” edited by Kyung-Ae Park and Scott Snyder

If you want to read an example of the generally worthless state of international relations scholarship, it’s hard to do worse than North Korea in Transition.

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It’s not that it’s put out by a bunch of cranks. It’s featured by the Council on Foreign Relations. And it’s not that it is not interesting. I highlighted several passages, many of which were thought provoking.

But… International Relations scholars, famously, can’t predict anything. The beginnings of wars, the outbreaks of peace, the collapse or emergence of empires — I’m aware of no solid model that can predict these as well as, say, the weather two days from now.

Some authors, like Bruce Cummings, appear to just be intellectual jokes

“American television rounded up all the usual images of North Korea: frightening soldiers goose-stepping through Pyongyang, a madman at the help who starves his people, missiles fired “over Japan” ( all missile launches are to the east, to take advantage of the Earth’s rotation)”

(pace)

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But generally, over and over, authors told us only what we already knew, and missed titanic changes under the surface.

It is noteworthy that the chair of the North Korean side in the DPRK-China Joint Guidance Committee for Economic Zones is Jang Song Taek, Kim Jong I’ls’ brother-in-law and vice chairman of the National Defense Commission

(yes, it is a noteworthy indeed that Jong Song Taek was arrested during a committee meeting, and tried as a traitor.)

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Kim Jong Un is known to have focused on taking control of the military and the intelligence apparatuses with teh full support of the two key
power holders, Jang Song Taek and Ri Yong Ho, under the tight supervision of Kim Jung Il.

(Well, we know something – perhaps what is not something we’re sure of.  Currently the only question is to what fraction of Jang’s family tree is annihilated.)

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This isn’t to say the entire book is trash. Chapter 8, “Low-Profile Capitalism: The Emergence of the New Merchant / Entrepreneurial Class in Post-Famine North Korea” by Andrei Lankov is very solid. In fact, it’s probably worth the price of the book.

The rest of it ca be tossed, though, unless you want to be a pimp, a tourist, a loser, or an escapee in the academic ghetto.

Interactive Fiction: Proteus

Proteus is the sixth piece of interactive fiction I’ve played.

Interactive fiction can be thought of as on two dimensions, the extent to which the game focuses on the “player” (who he is, why he is there, and so on) and the extent to which the game focuses on the environment (the emotions it evokes, the thoughts it provokes, and so on).

This allows us to create a simple 2×2 matrix

Not Player Centered Player Centered
Not Environment Centered N/A The Novelist,
Depression Quest
Environment Centered The Stanley Parable, Proteus Dear Esther,
Gone Home

Like The Stanley Parable, Proteus focuses exclusively on the environment. But while The Stanley Parable is cognitive, subverting the expectations of players, Proteus is emotive, building up a perfect child-like world with no rules, no enemies, and no protagonists — only delight.

Most reviewers of Proteus, whether their impressions are positive and negative, play Proteus for less than an hour. Whimsy without people or danger may be a hollow emotion indeed.

I played Proteus in Steam Edition on my Surface Pro.

Interactive Fiction: The Novelist

The Novelist is the fifth piece of interaction fiction I’ve played, after Dear Esther, The Stanley Parable, Gone Home, and Depression Quest.

The game is not as beautiful as Esther, not as subversive as Stanley, not as political as Home, and not as spartan as Depression. Rather, it strives for realism and universality. In The Novelist you play a disembodied spirit capable of reading the minds, and impacting the choices of three characters: a novelist, his wife, and their child.

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The entire game takes place within a house. Additionally, information is limited. For instance, is the novelist’s goal of writing the novel simply self-actualization nonsense (which implies one set of choices) or the only hope of a family for income (which implies a dramatically different set). How accurate is your ability t read minds, and how much veracity do the thoughts of the family have? These questions are unanswered and, largely, unaddressed.

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Many reviewers noted they cried during the game (See Rock, Paper, Shotgun‘s review). Perhaps I’ve listened to many hours of Dave Ramsey, but I interpreted the opening scenario as a looming economic and relationship disaster, and proceeded accordingly. Without spoiling the ending, if you consider the advise of Penelope Trunk, I achieved a happy outcome for all involved.

I played The Novelist in the Steam Edition on my Surface Pro.

Don’t Get Angry. Just Leave the Ghetto

Writing for Bloomberg, Megan McArdle suggests can’t get tenure? then get a real job. It’s good advise. In other words: can’t be a pimp? then leave the ghetto.

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McArdle is referring to an emotional debate about job searches in the academic ghetto. Here are some titles of the posts:

The entire controversy boils down to three points:

    • The academic ghetto pays almost everyone in it (except for pimps) really badly
    • The pay is so bad that it is painfully expensive to try to find another job in the ghetto
    • But at least Affirmative Action officers have a job!

As Megan McArdle notes, the solution is to get a real job. Leave the ghetto.

Gainful Employment and Education

Courtesy of College Insurrection and Instapundit, NBCNews has a story about student loans held my college drop-outs.

The article discusses a number of victims, but this one stood out:

Drew Scott, 26, registered for the for-profit Art Institute to study video game arts because he was attracted to the accelerated program.

“I didn’t completely understand what I was getting into,” he said. “I knew it was more expensive, but at the time, I thought, ‘they wouldn’t be charging more if it wasn’t better, right?’”

After two years of uneven teaching quality—“some of the teachers didn’t quite know what they were doing”—Scott concluded he wasn’t getting his money’s worth. He left the program earlier this year, owing $30,000 to the government and $15,000 to his parents. Scott now lives in Seattle and makes $11 an hour working part-time at a game-testing job. “I definitely didn’t need to go to school” to do this job, he said.

For profit-colleges have poor “optionality.” Instead of providing good opportunities with little danger, they provide mediocre opportunities with higher danger. The Department of Education’s new “Gainful Employment” is a first start, but it is took weak. The “gainful employment” rule should apply to all institutions that receive student loans.

wages_employment_majors_humanities_ghetto_mdA degree in the humanities ghetto from a Big State University or a private religious college is just as worthless as a degree in “game design” from the “Art Institute.”

We don’t know what the future holds. We need an educational system that makes learners resilient, even if the world changes. Our test scores are stagnant, our tests are broken, and top-down efforts can’t be the whole solution.

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We need to close the road to dead-end non-bankruptable debt. We need a “gainful employment” rule to apply to all colleges and universities. We need to track graduates, to to the PhD level. The Department of Education’s new rules are a good start. But more needs to be done.

Optionality and Economic Change

The book America 3.0 (available for purchase from Amazon and Barnes & Noble) describes three long economic periods, based on agriculture, industry, and information, as driving profound social change.

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When we fought the Revolution against Britain, America’s economy was based on agriculture and the hydrological cycle. Along with the constants of soil and sun, water (where it fell, how it needed to be diverted, where it ran) determined American economic life. Know a man’s relationship to water, and you knew his realtionship to wealth.

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Around the time of the Civil War against the southern rebels, sun, soil, and water were surprased by coal and rail as the foundation of power and privilege. The great rail network, centered around Chicago, enabled greater economies of scale than had ever been seen before in history. The story of the next century, from the racial strife of the 1860s to the racial strife of the 1960s, was the story of industrialization, scale, and how the benefits of coal would be shared.

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We’re now changing again. “Information” appears to be valuable, and the economic giants of the day are information racketeers such as Google, Apple, Amazon, and Facebook. The world is becoming much less heavy, and manufacturing on demand (from computer-driven milling to 3D printing) may accelerate the acceleration the eclipse of coal by data.

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We do not know what is next. The industrial age seemed to come to an apogee in the late 1940s, as economies around the world (the US, the UK, France, Germany, the USSR, China, Taiwan, both Koreas, and Japan) established bureaucratic-industrial welfare states managed by experts, with only quixotic variations based on national culture and ideology. But that was a false sunlight, as phony as the widespread popularity of the concentration camps (brought to the US by Franklin Delano Roosevelt) of the 1930s.

We know the world is changing. We know now what comes next.

In this environment, we should focus on giving learners many low cost opportunities and few high-cost high-risk paths. In other words, we should give students “optionality,” where they have many opportunities and few long-term costs. We’re not in an industrial age where we know economies of scale will rule the day, nor even in the long hydraulic age where water was the great idol. Students will have to find their own ways. We should help them.

To do this we should (except for core majors that are needed for national security — say science, technology, engineering, and mathematics) make much of the curriculum optional, and allow students “low-risk” trials in different career paths.

As Tren Griffen and Nassim Taleb posted:

If you ‘have optionality,’ you don’t have much need for what is commonly called intelligence, knowledge, insight, skills, and these complicated things that take place in our brain cells. For you don’t have to be right that often. All you need is the wisdom to not do unintelligent things to hurt yourself (some acts of omission) and recognize favorable outcomes when they occur. (The key is that your assessment doesn’t need to be made beforehand, only after the outcome.)” Being able to make decisions which do not require correctly forecasting the future is a wonderful thing. Not one of the great value investors identified in the series of posts in this blog relies on macro forecasts of the future. Instead, value investors use the optionality of cash to buy after the outcome exists (i.e., a significant drop in intrinsic value). Regarding venture capital, Warren Buffett believes: “If significant risk exists in a single transaction, overall risk should be reduced by making that purchase one of many mutually- independent commitments. Thus, you may consciously purchase a risky investment – one that indeed has a significant possibility of causing loss or injury – if you believe that your gain, weighted for probabilities, considerably exceeds your loss, comparably weighted, and if you can commit to a number of similar, but unrelated opportunities. Most venture capitalists employ this strategy.

It is certainly evil to trick an 18 year old into non-bankruptable loans of tens of thousands of dollars on a worthless major. A 16 year old would be better off learning a trade than learning Shakespeare, especially if that student could learn Shakespeare later. An 18 year old would surely be better off selling drugs (say from a pharmacy, an alcohol ball, a tobacconist shop, or so on) and learning that part of the economy than borrowing money to study political science.

Help our students prepare for an uncertain future, for America’s next stage of economic development. Give them low-cost opportunity and easy failures. Not non-bankruptable student loans.

The tDAxp eXPerience