Nature Abhors a Vacuum: Population and Technology

There is an old saying in physics that “nature abhors a vacuum,” as the stuff around the vacuum would just fill in the vacuum and remove it. If a random cubic meter of air suddenly disappeared above Manhattan, the surrounding air would immediately fill it.

A variant of this saying appears in political history, that power abhors a vacuum. When you have some equilibrium and remove a powerful state or leader from the world and leave no one in charge, you create a power vacuum where surviving people rush (often violently) to seize control. (This is why I think despite having an inordinate amount of US taxpayer money going to the military, getting rid of it immediately would make the world even worse.)

But there is one more sense of the vacuum that I’m worried about and it’s that of population growth. It is the Malthusian worry but I would frame it in more abstract terms that also allow for extreme technological innovation. The idea is that for most of human history, the population grew at a slow rate, limited by disease and lack of technology. But as technology exploded in the last 300 years, so did population. Every time we innovated—every the population became capable of expanding—it did so.

The worry argument goes like this:

  1. The human population will always expand to its current carrying capacity based on current technology and environmental conditions. (Nature abhors a vacuum.)
  2. Technological growth will likely push the apparent carrying capacity higher than now. (However, it may have already slowed down significantly, i.e. will we have another Green Revolution?)
  3. There is some overall limit on the human population as determined by Earth’s finite resources.
  4. Eventually (if it has not already happened), (1) and (2) will raise the population to well above that of (3), and a global crisis may eventually follow.

Disclaimer: I’m a long-term optimist and this post represents more of a worry than a prediction.

The Green Revolution

In 1970 Norman Borlaug won the Nobel Peace Prize for breakthroughs in agricultural production. He is often credited with the saving of a billion lives.

But the cynical side asks: Did the Green Revolution actually save a billion people, or did it merely postpone and inflate a much bigger crisis? Did the human population simply increase to the new carrying capacity, leaving us back where we started? In fact, some people would argue we are now worse than where we started, due to environmental impact and loss of biodiversity.

Borlaug himself was very aware of this. In his Nobel speech:

The green revolution has won a temporary success in man’s war against hunger and deprivation; it has given man a breathing space. If fully implemented, the revolution can provide sufficient food for sustenance during the next three decades. But the frightening power of human reproduction must also be curbed; otherwise the success of the green revolution will be ephemeral only. Most people still fail to comprehend the magnitude and menace of the “Population Monster”…Since man is potentially a rational being, however, I am confident that within the next two decades he will recognize the self-destructive course he steers along the road of irresponsible population growth… (Nobel Lecture 1970)

Keynesian Leisure Society

I think this is also a reason we don’t live in the Keynesian dream of the “leisure society”. The Keynes argument goes, since productivity (since 1930) will increase by many many factors to now, by this time we should be working two days a week to obtain the same productivity and spending most of our time in leisure. Yet obviously, we still work the same hours as before.

There are some common answers to this including how people increase their wants as soon as they get what they want (which is sort of related to this topic), and relatedly that people care more about relative wealth than absolute. Another explanation is rising inequality (which will be mentioned later). But a third explanation is just population growth. The technology made the carrying capacity a lot higher, and the population filled in the vacuum. And the work required to sustain similar relative conditions might still be 5 days a week.

Why We Shouldn’t Be Worried (Objections)

I’ll go through a couple of objections.

  • Earth doesn’t have a limited carrying capacity because technology will keep improving.

It’s true that technology will continue to improve for the foreseeable future. But eventually there must be a limit. Every time people have said this before, that the population couldn’t possibly double again. they were wrong, so I’ll make no claim about where that limit is. But eventually you can do some basic math on consumption requirements for a human at modern standard of living, and just multiply that by some number. I don’t know if the limit is 10 billion or 100 billion. But it’s there.

This is also a dangerous objection in that the potential problem becomes much worse as the population grows. If the Green Revolution did not happen, we could already be in a crisis, but it would be a crisis with 3 billion people. Now imagine the same crisis but with 20 billion.

  • The world eventually reaches the demographic transition everywhere.

I’d be very happy if this happened. The demographic transition is the phenomenon that has occurred in most Western countries and some other industrialized countries like Japan, where the fertility rate (children born per woman) has started to approach the replacement rate of 2.1 and in some cases drop below it. In the long run, every country reaching 2.1 would mean a constant population.

There are still three concerns. One is that there is strong religious pressure in some places to not use contraception. If you imagine a world where nobody changes religions (not too unimaginable), and that certain religions have a higher fertility rate, then in the long run that religion will dominate the world population and we will have this problem again. Though, it’s not clear which effect is bigger between the demographic transition and “Be fruitful and multiply.”

A second concern is that high inequality could be partly keeping the population in check. That is, the US population is not growing as fast as it can, because many people are in poverty and don’t have enough resources, but once we solve inequality, the population increases rapidly again.

The third concern is that the demographic transition might not be the the complete phenomenon. We don’t know the future, and maybe beyond some point, the demographic transition reverses and the population rises again.

The negative association of fertility with economic and social development has therefore become one of the most solidly established and generally accepted empirical regularities in the social sciences. As a result of this close connection between development and fertility decline, more than half of the global population now lives in regions with below-replacement fertility (less than 2.1 children per woman). In many highly developed countries, the trend towards low fertility has also been deemed irreversible. Rapid population ageing, and in some cases the prospect of significant population decline, have therefore become a central socioeconomic concern and policy challenge. Here we show, using new cross-sectional and longitudinal analyses of the total fertility rate and the human development index (HDI), a fundamental change in the well-established negative relationship between fertility and development as the global population entered the twenty-first century. Although development continues to promote fertility decline at low and medium HDI levels, our analyses show that at advanced HDI levels, further development can reverse the declining trend in fertility. (Myrskylä 2009)

Future Population


Finally, current projections of world population have the growth rate slowing down (United Nations Graphs). But I worry that this goes against basic intuitions of human nature and the vacuum. I worry it will keep increasing until it can’t.

On Reviewing Things

Every year I go through the movies I watched that year and assign a number from 1-10, adding it to my list of movie scores. For example, last year Arrival (10) was the best movie, followed by Star Trek Beyond (9) and Rogue One (9), while the worst was Assassin’s Creed (2). You can see the full list here.


This year I want to add a list for video games. But this seems much harder to do, for at least the following reasons:

  1. There is so much more variance in the amount of time spent. Most movies are about 2 hours long, plus or minus an hour. But video games can range from one hour to many thousands of hours. I think the shortest video game I completed (depending on what you call a video game and what you call “completed”) was Gone Home in 54 minutes, while I roamed the World of Warcraft for 3472 hours.
  2. There are lots of different goals in video games. Most movies can be graded on the same rubric. But for video games, there is again much more variance. For single-player/story modes, do you count the experience of just going through the main story, or all the side content as well? Do you care about the story at all if it’s a sandbox game? For RPGs, do you count the experience as getting to max level (if possible) or rather the full scope of endgame content? For multiplayer, do you care about the fun aspect or competitive aspect or even spectating? What about graphics/sound? “Art” games? How do you judge the quality of multiplayer when very few people are playing?
  3. Pricing. Movies generally cost about the same to watch in theaters and to rent. Games have lots of pricing models: one-time purchase, free-to-play, subscriptions, microtransactions, etc. It’s tough to compare across different price levels or models. What about expansions/DLC? What about games that start off bad but get better as more patches are made?

This makes me think rating games on a scale of 1-10 is not as meaningful as for movies. But I will probably try anyways.

Edit (3/5/2017): I made the list of video game ratings.

YOLOing, Holes, and Facebook


Millennials Just Want to YOLO

It is a month old but still one of the most amazing articles on millennials. Ok fine, to be fair, it is a particular group of millennials who bet all their money in the stock market and discuss their trades on Reddit and revere Martin Shkreli. I will just link to the article here [via MarketWatch] and copy in some of its glorious quotes:

“Y-O-F**KING-LO,” the teen wrote, flashing his trading statement. “900 to 55K in 12 days!”

On Reddit, he’s known as “World Chaos,” a Florida high schooler who earlier this year multiplied his money by betting against the S&P 500. His real name is Jeffrey Rozanski, and the 18-year-old’s appetite for risk would make many seasoned market players facepalm.


That was peak “WallStreetBets,” the Reddit forum where “YOLO” is the war cry, Martin Shkreli is a role model, and irreverent traders trawl for tickets to quick wealth. It has become what one member calls “the beating heart of millennial day traders.”


The latest obsession on WallStreetBets is UWTI an exchange-traded note that has become a favorite of younger investors — thanks, in part, to the Reddit forum. It is a near-perfect embodiment of the YOLO spirit: Highly volatile, it uses a combination of derivatives and debt to amplify bets on oil, creating opportunities for quick profits.


“This subreddit, they love Martin Shkreli,” said Asad Butt [hahahaha], a 25-year-old Pennsylvania trader who posts frequently to WallStreetBets. “He is living their dream. He got rich. He might have lied and cheated along the way, but [on the forum] that’s encouraged.”

“People want yachts,” Butt said. “They want to be rich. The joke is we are all aspiring millionaires. Shkreli actually did it. He’s a hero.”

Are you not entertained? At this point, you might as well just read the article since you’re reading half of it anyway, but I’ll throw in some more quotes:

Talk of “YOLOing” — going all in on a huge bet — is frequent, if not constant.


“If you find anything volatile and high risk, that’s where you’ll see people flocking,” Rogozinski said. “Are we encouraging risky behavior? Yes.”


“UWTI for LIFE baby!!” a subscriber named DrFreshh wrote in December. “History tells you all the patterns. It’s a big time win! Been researching for 20 hours straight (except for the occasional cigarettes). This is it boys and girls! Life savings on the line, we have hit the gold mine. Ask me anything and I can tell you why its bullish like none other, or the yacht is on me.”

When asked how many shares he intended to trade, DrFreshh responded, “100,000. 200,000. that’s pennies. This is an opportunity of a lifetime! I’m gonna invest like its get rich or die tryin.”


Teen trader Rozanski, meanwhile, admitted that his big win was “pretty much dumb luck.” He thought about buying a Ford Mustang with his haul, he said, but decided to keep the money to fund future investments, celebrating modestly: His mom took him out to see “The Big Short,” and he bought a new computer with two monitors.

“So I can trade better,” he explained.

I think people should be free to do what they want with their money, but at the same time, YOLOing all your money seems like a bad idea. Having a yacht is nice, but so is having more than zero dollars.

Usually I would make the standard boring disclaimer that nothing on this blog is ever financial advice, etc., but here is some actual financial advice—do not be like the people mentioned in that article.

Crawlspace for Sensitive Dragons

Occasionally I read Quora for amusement. This answer by Antonio Kowatsch seemed pretty usual for a Quora answer, until I got to the comments. First, here is the question and answer:

What are some examples of bad design?

I really don’t know if this has been mentioned already but in Hong Kong there are many Skyscrapers with holes. Quite literally holes. There is a reason for the unusual design: These holes are supposed to provide a safe passage for Dragons. (This is not a joke) Since they don’t really serve an actual purpose they are literally a waste of space, which happens to be an already scarce resource in Hong Kong. This definitely classifies as a design flaw.

Here are a couple of these so called Dragon gates/holes:


And then bam, people in the comments start defending the superstition that is feng shui and accusing Kowatsch of cultural disrespect. I want to give a little bit of a preface first before showing the comments:

  • I wouldn’t bother criticizing the comments section of a YouTube video or CNN article or Facebook post, but for some reason I have higher standards for Quora comments. Maybe the mistake is just that, and I should be ignoring these comments.
  • To the extent that “political correctness” is a real issue, I think these comments help demonstrate it. I’ve posted before about why some people are overly sensitive, and I can relate to the frustration that Kowatsch feels in his addendum. The process now is basically, someone gets offended (or tries to speak up for someone else theoretically getting offended), and instead of engaging in a rational debate, they say they are offended, shutting down any further discussion.
  • Oversensitivity is at least laudable in spirit when trying to defend a group of people. But in this case, the original poster pointed out a particular the way buildings were built that was based on superstition. Criticizing ideas, especially superstition, does not equal criticizing people.
  • Besides the accusations of cultural insensitivity, there are also people who say things like the holes are good because they allow wind through. But when it comes to physics, you need to actually do the physics, not just invent stories. The classic example is that in projectile motion, even Aristotle wrote that an object would keep moving in the launch direction until it ran out of impetus and then drop straight down. Makes sense. Except things actually move in parabolic arcs.

Here is the addendum, still by Kowatsch:

EDIT: OK, I didn’t think that so many people would argue that those “holes” are actually practical. But here I am. Exorcising this mental colic once and for all. People have left all kinds of baloney comments saying that they were “practical” because the wind could pass through them. Long story short; it’s bollocks and it does make me somewhat furious, I admit it. You may not know it but I studied physics and those holes don’t stabilize the buildings, but rather destabilize them. You know what would happen if really strong winds would act on those buildings? They would fold in half (horizontally) . Everyone who knows a little bit about statics & building physics would know that the load transfer in those buildings is suboptimal to say the least.

So here you go with some comments:

So you don´t like Feng Shui and the part about the dragon, too bad. But please understand: this is just your opinion, at the best an argument to building efficiently, but does not take into account the customs and traditions of the people living there. On the other side: there is a reason why those wholes [sic] are in those buildings: developers sell these flats like sliced bread. So a lot of HK people seem to have a different opinion from yours.


Now, lets ignore all these engineering issues. Those holes make those buildings ‘special’ and ‘interesting’. It has cultural values and gives a uniqueness which other cities don’t usually have.

It is not a bad design according to me.


According to this logic, anything that’s not a perfect rectangle box is a bad design.

What if they’re not trying to optimize for living space but to create a coherent skyline with cultural flair? Dragon legends are cultural – just because you don’t understand it doesn’t make it bad design. Unless you think HK people actually believe in dragons.


This concept is very much similar to Indian Vastu. First let me talk about the science. When you are designing a tall building (I am an Architect myself), wind load becomes a crucial element in structural loading. So these holes or punctures in the surface let wind flow through them easily. Hence better stability.


The holes are an adaptation of the skyscraper to the culture of Hong Kong, making the buildings acceptable to the people of the island.  To mock them as a design flaw as you do shows a lack of cultural sensitivity and tolerance.


Ask the residents of the buildings how well the Feng Shui is working for them, then one can say if the holes are bad designs or not.


Your answer is culturally biased. Xenophobic even.

Yep. When you disagree, call the other person culturally biased.

This section might just be overreacting to idiots in a comment section, but I see this same sentiment in many other places.

Now economically, in terms of whether real estate companies should construct buildings like this, that is completely up to them. If there is demand for buildings with holes in them, then by all means, make some supply. And if they are so aesthetically intriguing that they generate a lot of tourism, then sure, I’m in full support of holes. However, when someone talks about the relation of these holes to mythical dragons and feng shui, that is not xenophobia—that is stating a fact.

In related news, here is yet another “Why Free Speech Matters on Campus” article, by Bloomberg and Koch via the WSJ.

Facebook Bias, cont’d

Last time I talked about the Gizmodo story on Facebook employees allegedly manipulating the “trending” stories section to suppress conservative viewpoints. Since then, many more articles have popped up about it, and it seems like people really care about this topic. So let’s double down with another section.

I made the following points in the previous post:

  1. Facebook is a company, not a government organization. It does not have an obligation to be politically balanced.
  2. As a company, Facebook’s main goal is to generate profits, and if it does so better by instilling a liberal bias, then so what? In the scale of moral quandaries, this is pretty benign compared to what other companies do.
  3. Facebook is a social media site, not a news agency. And neither has an obligation to be politically balanced.
  4. There is some argument that the news media already has a liberal bias. If so, how is Facebook’s liberal bias different from that of other forms of media?
  5. Liberals tend to post more political things on Facebook than conservatives. So even if nobody working at Facebook is tweaking knobs, you should see more liberal posts than conservative ones, and liberal posts should trend more often.

One important thing I failed to mention was people perceived Facebook to be balanced (even though I claim it never was), and that this perception of balance is crucial. When people go to Fox News or The Huffington Post, they have expectations of political bias, but when they go to Facebook, they expect none (even though my points #4 and #5 argue you should). Thus, learning that Facebook is biased can be jarring.

As you can see, I am pretty calm about this, mainly because learning about this bias does not affect me. My Facebook circle is generally young, highly educated, and often academic, all three being strong indicators of being liberal. As a result, 95% of the posts I see are liberal anyway and I already don’t expect any semblance of political balance whatsoever when I login.

That said, I can see why some people would be taken aback. Facebook’s algorithms are still a complete mystery to me (probably rightfully so), and I feel there is not much transparency about what is going on behind the scenes. I don’t want to live in a house where I can see all the wires running through the walls, but understanding what happens when I plug something into an electric outlet provides some peace of mind.

Also, even if Facebook is right in claiming that no one is outright manipulating the trending section, it is almost certain that the reviewers are biasing the news subconsciously. Then again, what would that imply? Would you have to rely on algorithms to avoid this? But what if the algorithms too are biased? A NYT piece has more to say about Facebook and biased algorithms.

Here is Tom Stocky of Facebook, in a Facebook post:

My team is responsible for Trending Topics, and I want to address today’s reports alleging that Facebook contractors manipulated Trending Topics to suppress stories of interest to conservatives. We take these reports extremely seriously, and have found no evidence that the anonymous allegations are true.

Facebook is a platform for people and perspectives from across the political spectrum. There are rigorous guidelines in place for the review team to ensure consistency and neutrality. These guidelines do not permit the suppression of political perspectives. Nor do they permit the prioritization of one viewpoint over another or one news outlet over another. These guidelines do not prohibit any news outlet from appearing in Trending Topics.

The comments section of this post are so hilariously critical of Facebook, but as I said earlier in this blog post, “I wouldn’t bother criticizing the comments section of a YouTube video or CNN article or Facebook post.”

Facebook also released a 28-page document which is the detailed instructions manual to review trending topics. It is basically exactly what you would expect, though I do like the redacted lines.

Here is a Vox article that ties the bias to the echo chamber effect of social media, claiming “Facebook’s most biased curator is you.” The Atlantic opens with, “Facebook Doesn’t Have to Be Fair.” And here is Marginal Revolution on how the bias is probably demand driven.

I generally agree with these three articles. It is easy to call out “bias,” but what does that word mean in this situation? And even if it is biased, would it be wrong? I claim neither answer is obvious.


The New Yorker on the popularity of Donald Trump in China:

In many respects, ordinary people in China, or the “old hundred names,” as they are called—a colloquial catchall for those commoners who didn’t make it into the history books—are not unlike the largest segment of Trump supporters: of limited education, dispossessed, and frequently overlooked because of their distance from power. Abstract principles, which Hillary Clinton has been known to proclaim in China—of human rights and women’s rights—seem less relevant than the practical economic challenges facing the average citizen. “Trump is an exceedingly smart man who has had remarkable success in making hotels and towers and TV shows,” a Chinese blogger posted on a Web forum devoted to American politics. When someone else asked about Trump’s trade policies, many of which are hostile to China, the same blogger responded dismissively that Trump is “a businessman first and foremost” and “will do what is in both countries’ economic interest”—giving voice to the sentiment, perennially popular in China, that pragmatism inevitably reigns in the end.

The Washington Post on a debate by economists on the utility of Econ 101:

Even more problematic, some of the empirical research most celebrated by critics of economics 101 contradicts itself about the basic structure of the labor market. The famous “Mariel boatlift paper” finds that a large increase in immigrant workers doesn’t lower the wages of native workers. The famous “New Jersey-Pennsylvania minimum wage paper” finds that an increase in the minimum wage doesn’t reduce employment. If labor supply increases and wages stay constant — the Mariel paper — then the labor demand curve must be flat. But if the minimum wage increases and employment stays constant — New Jersey-Pennsylvania — then the labor demand curve must be vertical. Reconciling these studies is, again, way beyond the scope of an intro course.

Scientific American on why people edit Wikipedia articles for free:

Instead of public recognition, Gallus credits the success of this experiment primarily to the effect of identification with a community. That is, the symbolic recognition of receiving Edelweiss with Star made editors feel like they were part of an exclusive group. Although contributions that editors make to Wikipedia pages are public, no one gets direct credit for authorship. In the study, only about 6% of recipients publicly displayed their award on their user pages, so we can interpret this as an indication that Wikipedia editors responded well to private recognition rather than celebrity.

CNET Roadshow on the owner of a Tesla and Tesla blaming each other for crash:

While running errands, the owner claimed he parked his Model S behind a trailer. After a minute of standing near the car and talking to a fan of the brand, the owner went inside a nearby business. Five minutes later, he came out to a car with a crushed windshield and A-pillars.

After bringing the issue to Tesla’s attention, the automaker claimed it was not Tesla’s fault. Rather, the owner was “not being properly attentive” when using the car’s Summon feature, which can autonomously park the vehicle using its built-in sensors. The owner claimed he never engaged Summon.

Slate on the realism of virtual reality:

I couldn’t move. And I wasn’t laughing anymore.

Rationally, I knew that I was in a tiny, makeshift room in a convention center, surrounded by a crowd of onlookers watching me wobble and shake. I knew I was standing on a carpeted and fully corporeal floor, my arms held out for balance, and that I only had to walk about six feet in a straight line to finish. But it didn’t matter. The moment I moved to take my first step off the building and saw nothing but a wire separating me from a 1,300-foot fall to the ground below, some primal, reptilian part of my brain started screaming: YOU’RE GOING TO DIE.

The Guardian on a woman fired for not wearing heels:

Nicola Thorp, 27, from Hackney in east London, arrived on her first day at PwC in December in flat shoes but says she was told she had to wear shoes with a “2in to 4in heel”.

Thorp, who was employed as a temporary worker by PwC’s outsourced reception firm Portico, said she was laughed at when she said the demand was discriminatory and sent home without pay after refusing to go out and buy a pair of heels.

Facebook Bias, Bernie Sanders, and Ubers in Austin

Does Facebook Have a Liberal Bias?

I feel like this story is a lot less relevant than it sounds, but here is some background.

From CNN:

An anonymous former Facebook contractor says he witnessed colleagues suppress news about “popular conservative topics” from the website’s “trending” section.

Three former Facebook workers who spoke with CNNMoney echoed what some of Gizmodo’s other sources said — that personal biases might creep into the day-to-day “trending” work, but they never detected institutional bias for or against conservative information.

And here is the NYT:

Facebook denied the allegations after a backlash — from both conservative and liberal critics — erupted. “It is beyond disturbing to learn that this power is being used to silence viewpoints and stories that don’t fit someone else’s agenda,” read a statement from the Republican National Committee. “NOT LEANING IN… LEANING LEFT!” blared the top story on The Drudge Report, a widely read website.

The journalist Glenn Greenwald, hardly a conservative ally, weighed in on Twitter: “Aside from fueling right-wing persecution, this is a key reminder of dangers of Silicon Valley controlling content.” And Alexander Marlow, the editor in chief of Breitbart News, a conservative-leaning publication, said the report confirmed “what conservatives have long suspected.”

Intrigued yet? Here are some things to consider in defense of Facebook even if the allegations are true:

  1. Facebook is a company, not a government organization. It does not have an obligation to be politically balanced.
  2. As a company, Facebook’s main goal is to generate profits, and if it does so better by instilling a liberal bias, then so what? In the scale of moral quandaries, this is pretty benign compared to what other companies do.
  3. Facebook is a social media site, not a news agency. And neither has an obligation to be politically balanced.
  4. There is some argument that the news media already has a liberal bias. If so, how is Facebook’s liberal bias different from that of other forms of media?
  5. Liberals tend to post more political things on Facebook than conservatives. So even if nobody working at Facebook is tweaking knobs, you should see more liberal posts than conservative ones, and liberal posts should trend more often.


Facebook denies having any intentional bias. Here is the WSJ:

Facebook Inc. on Tuesday denied allegations from former workers who said the social media site suppressed news about conservative issues on its popular “trending” news feature.

Tom Stocky, Facebook’s vice president for search and the person responsible for the trending feature, defended the company’s practices and said it found “no evidence that the anonymous allegations are true.”

I wouldn’t be surprised either way, if there was or was no manipulation of trending news. Not that I’d notice—my Facebook newsfeed is nearly all liberal posts.

Also, I did warn that this topic is less relevant than it sounds. The best thing to do is recognize that there might be some liberal bias and move on.

Bernie Sanders and Efficient Markets

The headline for this section is not a joke, haha.

Some primary ago, Bernie Sanders won a state but his chance to win the Democratic nomination went down as a result. And on my social media feeds, people (esp. supporters of Bernie Sanders) didn’t seem to understand how this could happen. I also often heard things like “Sanders is projected to win the next 5 states, but the media is saying Clinton has practically won the nomination, so therefore the media is biased against Sanders.” This is of course nonsense. So here is my PSA to explain how markets work.

Test your understanding of markets by figuring out which statement is correct:

  1. Sanders is 5% to be the Democratic candidate according to prediction markets, but polls show him far ahead of Clinton in the next 5 states. Therefore, the real chance he has to win overall is something higher than 5%, maybe more like 10% or 20%.
  2. Sanders is 5% to be the Democratic candidate according to prediction markets, but polls show him far ahead of Clinton in the next 5 states. These polls don’t matter, and his chance to win overall is still 5%.

Naively, the first statement sounds better. But anyone who has caught on to the concept I am getting at would know that the first statement is wrong and that the second statement is correct. Why? The prediction markets already take into account the results of the polls. That is, the knowledge gained from the polls is already incorporated into the levels of the market. (This is, of course, assuming Efficient Market Hypothesis.)

You can apply the same concept to stocks. Let’s say Apple is $90 a share on the market, but you think it has a 10% chance to be bankrupt and worth $0. Thus, Apple is 90% to be worth $90 and 10% to be worth $0, for a fair value of $81 per share. [90%*$90 + 10%*$0 = $81.]

So should you sell Apple at $90? No. In fact, the calculation to get $81 is wrong.

Assuming you obtained your information legally, other people in the market, including those who have presumably spent far more time than you have researching the fundamentals of Apple, also think that Apple is 10% likely to be bankrupt. So here is what’s actually going on in the market:

  • People think Apple is worth $100 per share if it is not bankrupt.
  • It has a 10% chance to be bankrupt, in which case it is worth $0.
  • Thus, the fair price is 90%*$100 + 10%*$0 = $90.
  • Thus, it is trading at $90 in the market.

An interesting thing to consider is, what if Apple comes out on the news and releases some sales numbers, and now everyone thinks there is 5% chance Apple is bankrupt? The price actually increases, to $95 [95%*$100 + 5%*$0 = $95].

So people thinking Apple has a chance to be bankrupt can increase the price of the stock. The key is that the chance it is bankrupt is less than what everyone expected before.

Similarly, if prediction markets are already expecting Bernie Sanders to win a state with 60% of the vote but he wins with only 55%, his chance to become the nominee goes down.

You can see what prediction markets are saying about the 2016 race here.

Uber and Lyft in Austin

As a fan of free markets and as someone who grew up in Austin, TX, I am kind of sad to see Uber and Lyft shutdown in Austin over regulation. Here is TechCrunch:

Today voters in Austin went to the polls to weigh in on Proposition 1, an attempt to overturn a bill requiring mandatory fingerprint-based criminal background checks for new Uber and Lyft drivers in the city.

The results are in, and with 56 percent of total voters voting against Prop 1, the proposition failed to pass. This means that the bill requiring fingerprint-based background checks will proceed, with new drivers needing to pass the check before being able to drive.

In response to the news, Uber and Lyft have announced that they will be shutting down operations in the city — at least temporarily.

One idea of markets is that you wouldn’t do a transaction if you thought it was bad for you. So the fact that many people were using Uber in Austin before this meant that even without fingerprint checks, people preferred Uber to older cab services. And who benefits from this regulation? Older cab companies.

Of course, safety is good, but it seems ironic that a city that prides itself on being kept weird and being the new Silicon Valley, the tech capital of the south, is the one to introduce this kind of regulation that will just slow down tech development. The WSJ reports, “Austin is now the largest U.S. city where Uber isn’t currently available.”

It also seems like this is a weird political issue in that people who use Uber are generally young people, and young people are generally more liberal, but in this case they are more anti-regulation.

Here is Kristen S. Anderson, in one of the best passages from The Selfie Vote (Ch. 4):

Suffice to say, cabs hate Uber, as well as Lyft and other “ride-sharing” companies, as they came to be known. Ride-sharing companies are absolutely eating the cab industry’s lunch. Almost nothing about the existing taxicab system in most major cities resembles a free market, and the results are exactly what you’d expect. In a properly regulated free market, customers can make informed decisions about whether or not to engage someone in services for hire. They can vote with their wallets, choosing between a variety of competitors to patronize only quality vendors with good pricing, and those who offer poor service wind up failing.

The cab market in most cities is the opposite of this in nearly every way. When I’m standing on a street corner in a city, trying to hail a cab, I’m not choosing between quality drivers; I’m hopping in whatever cab pulls up and hoping for the best. I’ll pay the same rate whether the driver is kind  and funny and highly competent (as many drivers are!) or reeks of cigarette smoke and blasts the heat in July and drives like they’re running away from the cops. There’s no choice or competition, on price or quality. The lack of market forces makes the taxicab industry in many cities function like something out of the Soviet era: inadequate supply and mediocre quality.

Ride-sharing companies add competition, and there’s nothing an existing cartel hates quite like competition. In cities across the U.S., ride-sharing companies entered into battle with local regulators and taxicab unions, with the regulators and unions trying to keep the newcomers out of the market. In DC, for instance, cab protests have involved drivers swarming particular major thoroughfares and loudly honking their horns to draw attention to their plight (likely perturbing their intended audience in the process). But it wasn’t just free-market types and libertarians championing the cause of ride-sharing companies: I remember being amused at the many left-of-center writers I saw dropping their pro-union and pro-regulation posture when the unions and regulations were going to keep them from being able to get a cheap, quality ride home from work or happy hour (or perhaps Whole Foods!). The ride-sharing battle in many cities pitted entrenched interests against an upstart. Overwhelmingly, the young—moving to denser areas, eschewing cars when they can—were on the side of the upstart. And the battle over ride-sharing companies and regulations created a near picture-perfect example of the power of the oft-maligned free market to do great things, to encourage innovation, and to improve people’s quality of life.


MarketWatch on “Hillary Clinton reaping donations from Wall Street“:

The Democratic front-runner has raised $4.2 million in total from Wall Street, $344,000 of which was contributed in March alone. According to a Wall Street Journal analysis of fundraising data provided by the nonpartisan Center for Responsive Politics, the former secretary of state received 53% of the donations from Wall Street in March, up from 32% last year and 33% in January through February, as the nominating contests began.

Trump, by contrast, hasn’t garnered more than 1% of Wall Street contributions in any month through March.

The Atlantic on why empathy is bad:

Paul Bloom, psychologist and Yale professor, argues that empathy is a bad thing—that it makes the world worse. While we’ve been taught that putting yourself in another’s shoes cultivates compassion, it actually blinds you to the long-term consequences of your actions.

The Washington Post on being interrogated for doing math on a plane:

The curly-haired man laughed.

He laughed because those scribbles weren’t Arabic, or another foreign language, or even some special secret terrorist code. They were math.

Disclosure: I have done math on a plane before.


InterstellarFinally, a movie that supports technological progress! (As opposed to condemning it, like every other movie.)

This is just a great movie to exist right now. Granted, some of the messages, as critics have pointed out, are not very deep, but at least it has such messages that no other feature film dares to voice. Messages like nurturing a long-long-term solution, i.e. going into space, rather than plowing through the next harvest. Or messages about scientific tools being more valuable than the next dollar bill, as in the following dialogue:

Cooper: You don’t believe we went to the Moon?
Ms. Kelly: I believe it was a brilliant piece of propaganda, that the Soviets bankrupted themselves pouring resources into rockets and other useless machines…
Cooper: Useless machines?
Ms. Kelly: And if we don’t want to repeat of the excess and wastefulness of the 20th Century then we need to teach our kids about this Planet, not tales of leaving it.
Cooper: You know, one of those useless machines they used to make was called an MRI. If we had any of them left the doctors might have been able to find the cyst in my wife’s brain before she died, rather than afterwards. And then my kids could have been raised by two parents….

And then, of course, you have the more obvious ones: “We used to look up at the sky and wonder at our place in the stars, now we just look down and worry about our place in the dirt.” There is something simple yet infinitely dramatic to these lines.

Interstellar can be viewed in many ways, including as a space- and time-bending love story or as a “negative productivity shock hits the global economy.” I see it, perhaps over-optimistically, as a statement about what humanity can and will accomplish. More strongly, it is about what we must do if we wish to thrive as a species, let alone survive.

The Media

So all I’ve been hearing from the media in the last few days is the Zimmerman trial. Perhaps there might be some situation in which I would have actually followed it. But frankly, there was no reason for me to even care the slightest about the event.

Here are some recent events I actually care about:

  • The turmoil in Egypt.
  • The fate of Edward Snowden.
  • The highest ever close of the S&P 500 index (2 days in a row).

The first two could alter international relations and the third is a positive indicator for the economy. I fail to see how the Zimmerman case comes close to any of these, let alone deserves to be news. I could have seen the verdict being important to report, but not the whole trial leading up to it. It is just one case that determines one person’s guilt. Sure, it will provoke thought and debate indirectly on some larger issues, but if those bigger issues really are so important, why aren’t we already debating them?

Two Laptops

The XPS 13 arrived today, so I am now on a 2-laptop setup: one for portability, and one for performance.

2013-05-08 01.49.59
An XPS 13 (left) and an Alienware M17x (right).

For a size comparison, that is a Galaxy S3 sitting in front of the Alienware. The XPS 13 weighs 3.0 lbs, while the Alienware weighs 9.4 lbs. Below are the specs of the XPS 13 (and here is a link to the Alienware specs):

 Model Dell XPS 13
Picture XPS-13
Bought May 2013
Purchase Cost $575
Processor Intel Core i5 3317U @ 1.7 GHz
RAM 4 GB (2×2 GB)
Primary Storage 128 GB Solid State Drive
Graphics Card Intel HD Graphics 4000
Operating System Windows 8
Screen (Resolution) 13.3″ HD Widescreen (1366×768)
Wireless Intel Centrino Advanced-N 6235