The Nebulous Kingdom

TEDxConstitutionDrive

9/30/2010

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Come, please.  We'd love to have you.

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In the spirit of "ideas worth spreading," TED has created TEDx. TEDx is a program of local, self-organized events that bring people together to share a TED-like experience. Our event is called TEDxConstitutionDrive, where x = independently organized TED event. At TEDxConstitutionDrive, TEDTalks video and live speakers will combine to spark deep discussion and connection in a small group. The TED Conference provides general guidance for the TEDx program, but individual TEDx events, including ours, are self-organized.

The theme of TEDxConstitutionDrive is TRUST.  Trust as both a noun and a verb.  In a small venue with less than 100 people, we will explore different perspectives on trust that go beyond the basic morality and reach into business, technology and neuroscience to arrive at sometimes surprising conclusions.  Confirmed speakers include Anant Agrawal, CEO of Cantaloupe Systems, and Paul Zak, Director of the Center for Neuroeconomic Studies.

We hope to make this an intimate and low-key event where people who are deeply interested in the topic can engage with each other on a personal level.  Please come with an open mind and a sincere desire to connect with the ideas and the other attendees.

Register here:  http://TEDxConstitutionDrive.eventbrite.com

About TED

TED is a nonprofit organization devoted to Ideas Worth Spreading. Started as a four-day conference in California 25 years ago, TED has grown to support those world-changing ideas with multiple initiatives. The annual TED Conference invites the world's leading thinkers and doers to speak for 18 minutes. Their talks are then made available, free, at TED.com. TED speakers have included Bill Gates, Al Gore, Jane Goodall, Elizabeth Gilbert, Sir Richard Branson, Nandan Nilekani,Philippe Starck, Ngozi Okonjo-Iweala, Isabel Allende and UK Prime Minister Gordon Brown. The annual TED Conference takes place in Long Beach, California, with simulcast in Palm Springs; TEDGlobal is held each year in Oxford, UK. TED's media initiatives include TED.com, where new TEDTalks are posted daily, and the Open Translation Project, which provides subtitles and interactive transcripts as well as the ability for any TEDTalk to be translated by volunteers worldwide. TED has established the annual TED Prize, where exceptional individuals with a wish to change the world are given the opportunity to put their wishes into action; TEDx, which offers individuals or groups a way to host local, self-organized events around the world, and the TEDFellows program, helping world-changing innovators from around the globe to become part of the TED community and, with its help, amplify the impact of their remarkable projects and activities.

Follow TED on Twitter at twitter.com/TEDTalks, or on Facebook at facebook.com/TED

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A Math Metaphor

9/26/2010

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I was 19 and doing a degree in math at UCLA, and sitting in classes learning about a lot of things that would never be of much use to me.  Math was on my mind though, and so it shouldn’t be strange that during that critical period where you’re developing your life’s philosophy, I came up with a math metaphor.

 This is what it is:  that it’s not the function graph (the x-y graph) that matters.  It’s the derivative graph that matters, the graph of the rate of change.
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At time t, not knowing what lies ahead, would you rather have Life A or Life B?  Me, I’d rather have Life A.

Because people don’t notice states.  We’re like animals in that regard, noticing only the movement on the outskirts of our field of vision.  We notice differences, especially change.  Beyond a certain point, we can’t feel whether we are wealthy; we can only feel whether we are more wealthy than other people or more wealthy than we used to be.  When something amazing like winning the lottery or something terrible like becoming a paraplegic happens, our levels of happiness change for awhile and then revert back to where we used to be.  

Performance goals, as described in Daniel Pink’s Drive, don’t satisfy us in a sustainable way, while learning goals continue to offer satisfaction.  It’s crazy to chase after performance goals.  It’s the experience of living, all the phenomena that we experience in our own subjectively objective ways – our time – this is all there is, at least in this life (I can’t speak for what lies beyond…I have to think that no one can do so credibly).  Maybe a goal should be about the doing, and not the checkmark.

When I was 19 and adults (ha) would ask me what I wanted to be, I’d always respond, “I want to be better.”  “Better at what?”  But that’s not the point.
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Article: Trust, Psychology and the Way Forward

9/11/2010

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I started writing a draft of this article as a submission to a psychology magazine, but it fell by the wayside as my life got crazy.  I decided to finish it and post here.  Enjoy.

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If you drive down the dusty streets of Hyderabad in the southern state of Andhra Pradesh, you will notice that many of the walls are painted with block lettering.  “PROPERTY OF N. GOEL” on one wall, “THIS PROPERTY BELONGS TO A. RAO” on another.  Property ownership and transfer are subject to an elaborate set of rules, which may be bent at a public official’s discretion.  With enforced standards, a simple painted sign can establish a claim or throw one into dispute.  Lawsuits last for years and scams are common.

Unpredictable business dealings deter investment and dampen economic growth.  At one Aspen Institute seminar in February 2010, senior business leaders remarked that the predictable backroom negotiations of China were preferred to the unpredictable though more official procedures in India.  China, indeed, has grown consistently faster than India over the past decade.  The problem of real estate in India is, at its core, one of trust.

As the world becomes a more uncertain place and the weaknesses of classical economic models are exposed, trust emerges as a dominant strategy for navigating this new environment.  Trust is an expectation of the future in a situation of risk (Luhman 1988) and finite time.  Change creates uncertainty, which heightens the perception of risk.  Within this setting, trust is required to act.  Lack of trust, as in India, makes it harder to take risks.
 

Why is trust increasing in importance?

We see trust everywhere around us, in our financial system, in company brands, in politics, in our social relationships, and even in our very biology which predisposes us to reciprocity.  This has always been the case.  In the past 15 years, certain secular and interlocking trends have surfaced that have increased the criticality of trust.  First, we have seen a dramatic acceleration in the digital infrastructure.  With this, the Law of Unintended Consequences has been invoked in an unprecedented manner, resulting in far-reaching ripple effects – both positive and negative – of which we have yet to see the end.  Heightened uncertainty, increased transparency, and greater interconnectedness are just a few of the effects.

Second, globalization – which some commentators have noted is a dynamic tending to ebb and flow over the centuries – has generally been on the rise in the past 15 years.  The cross-fertilization of ideas and institutions, in combination with global trade, has resulted in spectacular economic growth in so-called emerging markets within the span of a single generation.  The resulting impact to geopolitical power structures and inevitable socio-cultural changes also increase the level of uncertainty.  At the same time, the impetus to conduct business with people from other cultures who are, on the surface, “unlike” us places greater emphasis on well-grounded trust as a facilitating mechanism.

Third, knowledge as a product and knowledge embedded in products have become a substantial proportion of world GDP.  Productivity growth and innovation therefore become largely driven by the sharing of knowledge through human interaction.  Knowledge-sharing is an inherently trust-oriented enterprise.  Therefore, distrusted firms and individuals who sit within knowledge silos can expect to experience significant disadvantage.

Finally, individuals and other non-state actors are growing in power.  Historically, nation-states and the Catholic Church held a near-monopoly on the ability to influence macro-level outcomes.  This is no longer the case.  Furthermore, there is no way to effectively control all non-state actors.  Selective and grounded trust is the only available way forward.  Ironically, as we look ahead, we find cogent reasons to do what we already knew we should be doing anyway.
 

How do we build trust?

Based on these secular trends, being trusted appears to be a sound strategy going forward.  Intuitively, behaving in a trustworthy manner – especially in an environment of lightning communication – seems to be the most effective way to achieve this goal.  But this takes time, often time that cannot be afforded.  Is there a way to build trust more efficiently?

This question has never been more relevant.  According to dead British economist John Maynard Keynes, recovery from a downturn demands that we have a return of both credit and confidence.  Confidence is the layman’s term but what he really means is trust, which, unlike confidence, presupposes a situation a risk (Luhmann 1988).  In some ways, a stimulus package is an attempt to initiate a virtuous cycle that returns confidence to the system. 

We find some lessons in the theoretical literature.  First, commitment signals are a tried-and-true method of building trust.  The gift of an engagement ring, the divestment of a business, and a highly public statement are all examples of strong commitment signals.  Closing off other options signals commitment to a single course of action.

Second, control is antithetical to trust.  A situation of risk is necessary for trust and control removes risk.  The greater the strictures, the less people will behave in a trustworthy manner when it makes selfish sense for them.  For instance, if a contract is drawn with financial penalties for noncompliance, people will tend to use a narrowly rational reasoning instead of a broader frame that includes social and psychological considerations such as ethics and morality.  Mortgage default is one example of this.  While governance mechanisms and institutions can provide the foundation for trust, they must leave enough room for free choice that significant risk still remains.

Similarly, trust and trustworthiness are self-fulfilling dynamics.  Trust engenders trustworthiness as much as trustworthiness engenders trust.  This suggests that if you want someone to trust you, you should start by trusting them.  Distrust is equally capable of generating a reality consistent with itself.  When institutions fail, low trust results in alienation and retreat to smaller worlds of only local importance (Luhmann 1988).  Because of this self-fulfilling dynamic, initial variables matter a lot.  This is why an initial gift, a cultural tradition in many societies, can be so powerful (Hart 1988).

Trust is an extrapolation based on some body of evidence owned by the truster, evidence which may not necessarily be true, relevant, or contemporaneous.  Therefore, the quality, diversity and quantity of information available can have a significant impact on degree of trust.  Continual physical proximity can amplify trust, since voice and visual cues offer rich information.  The good news is that trust can happen swiftly with high-bandwidth information flow.  In virtual environments, the typical lack of voice and visual cues relegates the responsibility for trust-building to the somewhat flat quality of responsiveness, one of the reasons why it is much harder to build trust through technology-mediated interactions.  

Social connection carries enormous weight in the trust-building process.  It offers both high-quality information and governance mechanism.  If a stranger is closely tied to the same social circle, then information about them can be collected from an array of sources.  Furthermore, social interaction is both diverse and cognitively demanding.  It presents significant challenges for strangers pretending to be someone they are not.  People also tend to value their reputation and relationships, both of which can be damaged through a major trust default. 

Finally, people are more willing to trust those who are “like” them.  This is why “mirroring” can be effective in interview situations.  The rational explanation for this dynamic is that the effort to gather information about people who are unlike oneself is greater, and the risk that accompanies trusting behaviour is perceived to be higher.  Those seeking to build trust should consider how to engage von Economo neurons that stimulate empathy, such as finding common ground or telling a story.             


What does this mean for the field of psychology?

Psychology is situated in a more than an individual, organisational or social context.  It is also set in the background of politics, economics, and the sciences.  Its relevance is dictated by the demands of a world larger than the pure academic discipline and a society broader than the few individuals fortunate enough to have letters after their name.  The intersections are becoming the most fruitful source of productive friction – between theory and application, developed nations and emerging markets, historical context and a radically different future.  To operate at these intersections, a good psychologist must become a polymath.

The intersection between psychology and economics holds particular fascination.  Economists at the University of Chicago and elsewhere have ploughed the field of behavioural economics and found it rich.  While Dan Ariely and Richard Thaler have written best-selling books, the field of economic psychology has stayed quiet for the past 30 years as many psychologists sought to avoid anything with the “taint of the economic.” 

Psychologists miss a tremendous opportunity to extend common thinking beyond the typical narrow rationality nurtured by classical economic tradition to a view of the individual that is a more accurate representation of reality.  After all, the goal of the social sciences should be to help people make sense of the real world.  This view should incorporate socio-psychological and biological considerations into the individual decision framework, including the human desire to maintain relationships, our natural empathy with others, the power of social status, inter-social influence, and the need to maintain a coherent self-identity.  The tradeoffs we make daily to optimize our resources and time are not always made with economic motivations.  They are usually made, however, using the brain’s capacity for economic reasoning.  While economists like to call people irrational, in truth most people’s decisions “make sense” – at least for them.   What cannot be measured is not necessarily invalid.  The counterpoint to the economist’s “predictable irrationality” is the psychologist’s “unpredictable rationality.” 

 

References

Hart, Keith (1988) “Kinship, Contract and Trust:  The Economic Organization of Migrants in an African City Slum.” In: Gambetta, Diego (ed.)  Trust:  Making and Breaking Cooperative Relations. Oxford:  Basil Blackwell, Inc.

Luhmann, Niklas (1988) “Familiarity, Confidence, Trust:  Problems and Alternatives.” In Gambetta, Diego (ed.) Trust: Making and Breaking Cooperative Relations, Department of Sociology, University of Oxford, Ch. 6, 94-107.

 
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12 Keynesian Insights

9/11/2010

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“12 Keynesian Insights to Blow the Mind of Larry Kudlow”

http://www.businessinsider.com/12-2010-9

 
I don’t know if Nicholas Carr is right in thinking that the Internet is making us stupid, but it certainly takes greater concentration for me to read long-form – especially a long-form magnus opus written by a British economist in the language of 1936.  That’s why I appreciate Elliot Turner’s effort to synthesize 12 insights from Keynes’ The General Theory of Employment, Interest and Money (h/t Byron Koay and Google Buzz for sending this article my way). 

While I’m not a card-carrying Keynesian, this helped me understand what it means to be one.  And after all, just because you think someone’s wrong about one thing doesn’t mean you can’t think they’re right about another. 

Somewhat shamefully, however, the excerpts still required an inordinate level of concentration to read and understand.  Therefore, I offer you, dear reader, the Twitter version of an article extracting 12 excerpts from a 403-page economic bible:

1.        Capitalism is good, but the unemployment it’s causing sucks.  Let’s fix the problem but keep the good stuff (efficiency and freedom).

2.       Greed and private ownership can result in valuable human outcomes.  We should manage human nature, not try to change it.

3.       Changing views of the future affect employment levels.

4.       Either low confidence or weak credit can cause a crash.  But an improvement in both is needed for a recovery.

5.       Stock market prices affect other kinds of investments as well (because money is fungible).

6.       Doing good isn’t always most profitable. Long-term investors need more buffer, must use less debt, and are more criticized (short run).

7.       It takes time to recover, because surplus/durable assets take time to be absorbed to the point where it makes sense to invest again.

8.       Speculation – investing based on what the average opinion believes the average opinion to be – is dangerous when it becomes the norm

9.       Most of our positive actions are based on spontaneous optimism, i.e. “animal spirits,” not calculated reasoning.

10.    It’s easier to give money away (tax cuts in times of deficit) than invest it. With the former, you don’t have to justify the expenditure

11.    Bubble = optimism overcoming more supply, rising costs and high rates. Eventual disillusionment causes a crash and all flee to liquidity

12.    Low rates aid recovery but marginal efficiency of capital is less easy to manage. Return of confidence is necessary yet hard to control.

Bonus:  The difficulty lies not in new ideas but the old ones that have crusted over in our minds’ corners.
 

It strikes me how bold (and probably arrogant) Keynes must have seemed at the time The General Theory was written.  While I don’t think he was right in all things and actually believe macroeconomics is akin to chaos theory, I applaud the ambition of his endeavor.  I belong to the “I don’t know” school (see post on Howard Marks) but that doesn’t mean that you throw your hands up and abdicate responsibility for wrestling with the big questions.
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The Economic Psychology of Trust: An Exploration of Knowledge-Sharing in a Large Management Consultancy

9/8/2010

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Abstract

As large global corporations seek more effective ways to use the knowledge that exists in their far-flung enterprises, their size and diversity – the very qualities that offer so much promise – become hindrances.  The technology that facilitates the digital lifeblood of these goliaths is also changing the nature of knowledge as a competitive advantage.  What can be codified and stored, i.e. explicit knowledge, is depreciating at an accelerated pace, and can no longer offer sustainable advantage.  It is tacit knowledge that is hard to put into words and even harder to quantify, the know-how of the “gut,” that remains the scarce commodity.  It is contextual, timely, useful, and sticky.  These qualities are valuable but also make tacit knowledge more difficult to share.  The rewards are great for those firms that can do this well.

This research seeks to explore the role of trust in shifting the psychological levers that drive knowledge-sharing.  We present a model of knowledge-sharing based on an “economic psychology” that extends beyond the narrowly rational and selfish view.  We posit the use of economic reasoning in knowledge-sharing, that is, the daily tradeoffs and judgments that are weighed and made to optimize the scarce resource of time.  That economic reasoning takes into account psycho-sociological considerations as well – such as the human desire to build relationships with others, the influence of others, the power of social status, the need to maintain a coherent self-identity, institutional norms, and the cultural meaning of the “gift.”

We follow the outgoing streams of knowledge from 35 strategy consultants at a large global management consultancy, and ask questions about the implicit relationships between sender and recipient.  Email traffic is used as the medium in focus, for its widespread and intensive use at this firm as well as its capacity to be measured.  While email has high predictive value in this firm as an indicator of “trusted network,” its obvious limitations required detailed follow-up surveys at the recipient level and a series of confidential interviews.  In this research, we confirm the “virtuous cycle” between trust and knowledge-sharing, and uncover nuances that include the importance of proximity, the role of responsiveness in building trust virtually, the differences between sharing “up” and sharing “down,” and the contrast between proactive sharing and acquiescing to a request.


Full dissertation available here:
full_dissertation_20100816.pdf
File Size: 2411 kb
File Type: pdf
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Why I'm worried about Google

9/4/2010

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Google's mission:  organizing information
Application use:  high (55M unique monthly visitors in US)
Request estoteric-ism:  low (major city to major nearby snow resort) 
Request complexity:  low (accurate spelling, full names)
Response quality:  Truly terrible

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http://www.tutor2u.net/blog/files/google_1211.jpg

Not sure what they're doing with all their employees.  Still making good money but those people must be of the expensive sort.
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    I'm interested in uncertainty, time, trust, consistency, strategy, economics, empathy, philosophy, education, technology, story-telling, and fractals.
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