Thoughts in Between

by Matt Clifford

TiB 111: "Disrupting government"; Amazon's altruism; the moral foundations of capitalism; and more...

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How do we "disrupt government"?

Marc Andreessen, co-creator of the web browser and leading VC, has an interesting new essay - “It’s Time To Build” - that looks at how we build the post-coronavirus future. There’s been a lot of commentary (try here, here and here for some Twitter highlights), but the best long form response I’ve seen is this from super-blogger José Luis Ricon who walks through all the impediments to “building” that exist today - above all political barriers.

Towards the end Ricon comments, "organizations need constant replacement [but] one can't help but notice that governments are not disrupted at all”. This is an important observation. This week I stumbled across a plan for doing just that in this excellent post, “On Administration Markets" by Chris Beiser. The core thesis is that we need a (non-violent) way for the best administrations to grow and the worst to shrink. 

If we allowed, say, South Korea to “rent out” its pandemic response apparatus, there'd be big public health gains. But there'd also be second order benefits, Beiser argues. It would increase competitive pressure on administrations; provide a mechanism for allowing bureaucracies to innovate and iterate; and, above all, attract ambitious talent into the sector (an argument to which long time readers know I’m sympathetic). There are lots of problems, of course, but it feels like a good time for radical ideas. 

The fragility of capitalism's ethical foundations

That said... Ryan Avent of the Economist has an excellent post this week on ethics and capitalism. The basic argument is that standard policy frameworks usually frame problems like pollution or carbon emissions as "externalities" that need to be properly priced - but what if we think of them as ethical lapses instead? This matters because it touches on the scalability of different approaches to business ethics. 

Milton Friedman's influential argument was that the “social responsibility of business is to increase its profits” (legally). One apparent advantage of this is that it scales gracefully: if externalities are well priced, we don’t need to worry about the virtue of executives; we just need them to obey the law. Moreover, there’s a strand of thought in the intellectual history of capitalism that markets make us moral because we have to serve the needs of others to prosper; Avent cites Deirdre McCloskey, but see also the discussion in Albert Hirschman’s superb The Passions and the Interests.

But what if the opposite is true? Avent argues that "complex market activity is impossible in the absence of a robust, pro-social ethical foundation” i.e. morality makes markets. This foundation is a commons, in the sense of a resource owned by the community collectively. If executives act unethically (but legally) they damage it - and we get a tragedy of the commons. Over time, markets become about power, rather than meeting demand. We’ve discussed several examples in recent months of legal but corrosive market behaviour. Virtue is hard to scale, but it may also be essential.

Amazon's altruism and the risks of a measurable world

We talked back in February about the socialist calculation debate of the 1920s and whether "big data plus machine learning" would resolve it in the socialists’ favour. Byrne Hobart has an excellent post this week on this - and whether Amazon is proof that "true communism has never been tried, because they didn’t have enough RAM”. I don’t think so, for the reasons discussed last time (above all this piece), but it’s a superb essay.

Hobart’s broader point about the incentives of companies like Amazon that are vast enough to approximate whole national economies is fascinating. He introduces a provocative idea - the "altruism quotient”, which he defines as the share of GDP growth that accrues to a company’s market value (for Amazon, he calculates this to be an extraordinary 12%!) The point is that as a company becomes large relative to economic growth, it has an incentive to grow GDP generally.

As Hobart points out, this sounds great (hence “altruism quotient”), but has a dark side. It means Amazon also has an incentive to make as much of the economy measurable (or legible) as possible. Hobart doesn’t expand much on why this might be bad - except for referencing James Scott’s Seeing Like a State - but it reminds me of this superb Paul Christiano piece (my favourite essay on AI safety) which argues that a fully measurable word is a realistic dystopia. Something to ponder as you wait for your next Prime delivery. 

Quick links

BONUS: The excellent Gemma Milne's book on technology hype, Smoke and Mirrors, is out this week. It's great. I have five copies to give away. Email me if you'd like one...

  1. Party like it's 1709. The last time the British economy contracted as much as today, Europe literally froze.
  2. Beethoven as you've never seen him before. The Fifth Symphony as tiny animated skiers. That sounds unpromising, but it's a must watch.
  3. The revolt of the public continues. Which institutions are gaining and losing public support in the coronavirus era? (See also this study.)
  4. How rich is "average"? Great thread of charts of where the median citizen of each country sits on the global income distribution.
  5. No prizes for guessing 2020. What were fund managers' perceived "biggest tail risks" over the last decade?

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Until next week,

Matt Clifford