📖 Read pages 30-43 of Complexity and the Economy by W. Brian Arthur

📖 Read pages 30-43 of Complexity and the Economy by W. Brian Arthur

Chapter 2 is a nice piece on the El Farol Problem which is a paradox which “represented a decision problem where expectations (forecasts) that many would attend [the El Farol bar] would lead to few attending, and expectations that few would attend would lead to many attending: expectations would lead to outcomes that would negate these expectations.”

Zhang and Challet generalized this problem into the Minority Game in game theoretic form.

Page 31:

There are two reasons for perfect or deductive rationality to break down under complication. The obvious one is that beyond a certain level of of complexity human logical capacity ceases to cope–human rationality is bounded. The other is that in interactive situations of complication, agents cannot rely upon the other agents they are dealing with to behave under perfect rationality, and so they are forced to guess their behavior. This lands them in a world of subjective beliefs and subjective beliefs about subjective beliefs. Objective, well-defined, shared assumptions then cease to apply. In turn, rational, deductive reasoning (deriving a conclusion by perfect logical processes from well-defined premises) itself cannot apply. The problem becomes ill-defined.

This passage, though in an economics text, seems to be a perfect statement about part of the problem of governing in the United States at the moment. I have a thesis that Donald Trump is a system 1 thinker and is generally incapable of system 2 level thought, thus he has no ability to discern the overall complexity of the situations in which he finds himself (or in which the United States finds itself). As a result, he’s unable to effectively lead. From a complexity and game theoretic standpoint, he feels he’s able to perfectly play and win any game. His problem is that he feels like he’s playing tic-tac-toe, while many see at least a game as complex as checkers. In reality, he’s playing a game far more complex than either chess or go.

The overall problem laid out in this chapter is an interesting one vis-a-vis the issues many restaurant startups face, particularly in large cities. How can they best maximize their attendance not only presently, but in the long term while staying afloat in very crowded market places.

Page 38:

The level at which humans can apply perfect rationality is surprisingly modest. Yet it has not been clear how to deal with imperfect or bounded rationality.

Chapter 3 takes a similar problem as Chapter 2 and ups the complexity of the problem somewhat substantially. While I understand that at the time these problems may have seemed cutting edge and incomprehensible to most, I find myself wondering how they didn’t see it all from the beginning.

Complexity and the Economy by W. Brian Arthur
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🔖 An Introduction to Transfer Entropy: Information Flow in Complex Systems

An Introduction to Transfer Entropy: Information Flow in Complex Systems by Terry Bossomaier, Lionel Barnett, Michael Harré, Joseph T. Lizier (Springer; 1st ed. 2016 edition)
This book considers a relatively new metric in complex systems, transfer entropy, derived from a series of measurements, usually a time series. After a qualitative introduction and a chapter that explains the key ideas from statistics required to understand the text, the authors then present information theory and transfer entropy in depth. A key feature of the approach is the authors' work to show the relationship between information flow and complexity. The later chapters demonstrate information transfer in canonical systems, and applications, for example in neuroscience and in finance. The book will be of value to advanced undergraduate and graduate students and researchers in the areas of computer science, neuroscience, physics, and engineering. ISBN: 978-3-319-43221-2 (Print), 978-3-319-43222-9 (Online)

Want to read; h/t to Joseph Lizier.
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🔖 Confessions of the Pricing Man: How Price Affects Everything by Hermann Simon

Confessions of the Pricing Man: How Price Affects Everything by Hermann Simon (Springer, 2015)
The world’s foremost expert on pricing strategy shows how this mysterious process works and how to maximize value through pricing to company and customer.

In all walks of life, we constantly make decisions about whether something is worth our money or our time, or try to convince others to part with their money or their time. Price is the place where value and money meet. From the global release of the latest electronic gadget to the bewildering gyrations of oil futures to markdowns at the bargain store, price is the most powerful and pervasive economic force in our day-to-day lives and one of the least understood.

The recipe for successful pricing often sounds like an exotic cocktail, with equal parts psychology, economics, strategy, tools and incentives stirred up together, usually with just enough math to sour the taste. That leads managers to water down the drink with hunches and rules of thumb, or leave out the parts with which they don’t feel comfortable. While this makes for a sweeter drink, it often lacks the punch to have an impact on the customer or on the business.

It doesn’t have to be that way, though, as Hermann Simon illustrates through dozens of stories collected over four decades in the trenches and behind the scenes. A world-renowned speaker on pricing and a trusted advisor to Fortune 500 executives, Simon’s lifelong journey has taken him from rural farmers’ markets, to a distinguished academic career, to a long second career as an entrepreneur and management consultant to companies large and small throughout the world. Along the way, he has learned from Nobel Prize winners and leading management gurus, and helped countless managers and executives use pricing as a way to create new markets, grow their businesses and gain a sustained competitive advantage. He also learned some tough personal lessons about value, how people perceive it, and how people profit from it.

In this engaging and practical narrative, Simon leaves nothing out of the pricing cocktail, but still makes it go down smoothly and leaves you wanting to learn more and do more―as a consumer or as a business person. You will never look at pricing the same way again.

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‘Ugh, I’m So Busy’: A Status Symbol for Our Time | The Atlantic

‘Ugh, I’m So Busy’: A Status Symbol for Our Time by Joe Pinsker (The Atlantic)
Once, long ago, being richer meant working less.

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5 business books you should read this year | World Economic Forum

5 business books you should read this year by Verne Harnish (World Economic Forum)
Fortune round-up 5 business books to learn from.

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Kenneth Arrow, Nobel-Winning Economist Whose Influence Spanned Decades, Dies at 95 | The New York Times

Kenneth Arrow, Nobel-Winning Economist Whose Influence Spanned Decades, Dies at 95 by Michael M. Weinstein (New York Times)(Duration: PT13H40M58S)
Professor Arrow, one of the most brilliant minds in his field during the 20th century, became the youngest economist ever to earn a Nobel at the age of 51.

Kenneth J. Arrow, one of the most brilliant economic minds of the 20th century and, at 51, the youngest economist ever to win a Nobel, died on Tuesday at his home in Palo Alto, Calif. He was 95.

His son David confirmed the death.

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🎧 Spam: a special edition | Eat This Podcast

Spam: a special edition by Jeremy Cherfas (Eat This Podcast)
I did not know that that the famous Monty Python spam sketch was recorded on 6 June 1970. At least, that’s the claim of a Tumblr obsessed with Minnesota in the 1970s. (Wikipedia says only that “[i]t premiered on 15 December 1970”.) However, I need no encouragement to share a programme on Spam that I made for BBC Farming Today back in 1997, a programme that was both very well received and a blast to make. the people at Hormel couldn’t have been nicer, and the butterfly spam balls weren’t bad either.

Monty Python and Spam
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There’s so much more to spiced ham than one could have ever thought. It’s not only a great slice of Americana, but there’s some science and interesting economics behind the things that go into making it. Both a fun and fascinating episode.

🔖 Evidence for a limit to human lifespan | Nature Research

Evidence for a limit to human lifespan by Xiao Dong, Brandon Milholland, and Jan Vijg (nature.com)
Driven by technological progress, human life expectancy has increased greatly since the nineteenth century. Demographic evidence has revealed an ongoing reduction in old-age mortality and a rise of the maximum age at death, which may gradually extend human longevity. Together with observations that lifespan in various animal species is flexible and can be increased by genetic or pharmaceutical intervention, these results have led to suggestions that longevity may not be subject to strict, species-specific genetic constraints. Here, by analysing global demographic data, we show that improvements in survival with age tend to decline after age 100, and that the age at death of the world’s oldest person has not increased since the 1990s. Our results strongly suggest that the maximum lifespan of humans is fixed and subject to natural constraints.
[1]
X. Dong, B. Milholland, and J. Vijg, “Evidence for a limit to human lifespan.,” Nature, vol. 538, no. 7624, pp. 257–259, Oct. 2016. [PubMed]
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🔖 Blockchain Revolution: How the Technology Behind Bitcoin Is Changing Money, Business, and the World by Don Tapscott, Alex Tapscott

Blockchain Revolution: How the Technology Behind Bitcoin Is Changing Money, Business, and the World by Don Tapscott, Alex Tapscott (Portfolio, May 10, 2016)
The first generation of the digital revolution brought us the Internet of information. The second genera­tion—powered by blockchain technology—is bringing us the Internet of value: a new, distributed platform that can help us reshape the world of business and transform the old order of human affairs for the better.

Blockchain is the ingeniously simple, revolution­ary protocol that allows transactions to be simul­taneously anonymous and secure by maintaining a tamperproof public ledger of value. Though it’s the technology that drives bitcoin and other digital cur­rencies, the underlying framework has the potential to go far beyond these and record virtually everything of value to humankind, from birth and death certifi­cates to insurance claims and even votes.

Perhaps not necessarily this particular book which appears to be on the overview side, but sometime this year I’d like to delve more deeply into the concept of blockchain and the tech behind it.

Anyone have recommendations of books they liked?

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Chris Aldrich is reading “How Donald Trump is changing the rules for American business”

The president and corporations: How Donald Trump is changing the rules for American business (The Economist)
HIS inauguration is still six weeks away but Donald Trump has already sent shock waves through American business. Chief executives—and their companies’ shareholders—are giddy at the president-elect’s promises to slash burdensome regulation, cut taxes and boost the economy with infrastructure spending.

This article takes much the same view of Trump’s economic policies as I (and I’m sure many) do. I’ve been hoping every day for more than a year and a half that more politicians would take Cesar Hidalgo’s book Why Information Grows as the basis for their economic policies. Alas…

Highlights, Quotes, & Marginalia

American capitalism has flourished thanks to the predictable application of rules. If, at the margin, that rules-based system is superseded by an ad hoc approach in which businessmen must take heed and pay homage to the whim of King Donald, the long-term damage to America’s economy will be grave.

Such tariffs would be hugely disruptive. They would make goods more expensive for American consumers. By preventing American firms from maximising their efficiency using complex supply chains, they would reduce their competitiveness, deter new investment and, eventually, hurt workers’ wages across the economy. They would also encourage a tit-for-tat response.

The role of lobbyists will grow—an irony given that Mr Trump promised to drain the Washington swamp of special interests.

Nonetheless, Mr Trump’s approach is worrying. Unlike the Depression, when Hoover and then Roosevelt got companies to act in what they (often wrongly) saw as the national interest; or 2009, when Mr Obama corralled the banks and bailed out Detroit, America today is not in crisis. Mr Trump’s meddling is thus likely to be the new normal. Worse, his penchant for unpredictable and often vindictive bullying is likely to be more corrosive than the handouts most politicians favour.

Mr Trump’s mercantilism is long-held and could prove fierce, particularly if the strong dollar pushes America’s trade deficit higher (see article). Congress would have only limited powers to restrain the president’s urge to impose tariffs. More important, even if rash protectionism is avoided, a strategy based on bribing and bullying individual companies will itself be a problem.

But over time the damage will accumulate: misallocated capital, lower competitiveness and reduced faith in America’s institutions. Those who will suffer most are the very workers Mr Trump is promising to help. That is why, if he really wants to make America great again, Mr Trump should lay off the protectionism and steer clear of the bullying right now.

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Chris Aldrich is reading “Trump and Carrier: How a Modern Economy Is Like a Parking Garage”

Trump and Carrier: How a Modern Economy Is Like a Parking Garage by Justin Wolfers (nytimes.com)(Duration: PT20H36M40S)
It’s a constant state of flux, with jobs being created or lost. The challenge is to have a business climate in which you have more of the former.
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📖 On page 16 of Dealing with China by Henry M. Paulson, Jr.

📖 On page 16 of 448 of Dealing with China by Henry M. Paulson, Jr.

A simple preface followed by an anecdote about the beginning of a deal relating to telecom. The style is quick moving and history, details, and philosophy are liberally injected into the story as it moves along. This seems both interesting as well as instructive.

Highlights, Quotes, & Marginalia

“There are some who believe that an immutable law of history holds that conflict is inevitable when a rising power begins to bump up against an established one. But no law is immutable. Choices matter. Lessons can be learned.”

—page XIV

“Prescriptions, after all, are easier to make than predictions.”

—page XIV

“Note taking allows Party and government officials to get quick reads on what went on at meetings they didn’t attend. […] Private meetings with senior government officials without recoring devices or note takers are rare and highly sought after.”

—page 10

“…the so-called iron rice bowl, the cradle-to-grave care and support guaranteed by the government through the big companies people worked for.”

—page 11

“The Party had made a simple bargain with the people: economic growth in return for political stability. That in turn meant Party control. Prosperity was the source of Party legitimacy.”

—page 11

“Messages in China are sent in ways that aren’t always direct; you have to read the signs.”

—page 14

“It was the nature of dealing with China: nothing was done until it was done.”

—page 14

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📗 Started reading Dealing with China by Henry M. Paulson, Jr.

📗 Started reading Dealing with China by Henry M. Paulson, Jr.

Former head of Goldman Sachs and U.S. Treasury Secretary Henry M. Paulson , Jr. and the cover of his 2015 book Dealing with China
Former head of Goldman Sachs and U.S. Treasury Secretary Henry M. Paulson , Jr. and the cover of his 2015 book Dealing with China

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🔖 Want to read Dealing with China: An Insider Unmasks the New Economic Superpower by Henry M. Paulson, Jr.

🔖 Want to read Dealing with China: An Insider Unmasks the New Economic Superpower by Henry M. Paulson, Jr.

Picked up a copy at Little Free Library #21797 at 8:29 am
ISBN: 978-1-4555-0421-3 First Edition Hardcover

Former head of Goldman Sachs and U.S. Treasury Secretary Henry M. Paulson , Jr. and the cover of his 2015 book Dealing with China
Former head of Goldman Sachs and U.S. Treasury Secretary Henry M. Paulson , Jr. and the cover of his 2015 book Dealing with China
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