Sunday, March 18, 2012

The Tragedy of Bits

The content/hardware markets are a crazy inversion. Hardware has marginal costs; bits don't. Yet hardware is now being subsidized by the high "margins" on selling bits. The price you pay to flip bits in your device pays for the cost of the device itself. There's a war raging for who gets to be the one with the 30% cut of every bit sold. It's being fought with device subsidies and a combination of habits, defaults, and lock-in. Amazon doesn't pretend to accommodate competing bit sellers on their devices. Apple is happy to let them sharecrop for the same 30% cut. Console gaming is becoming the model for everything, exploiting the inability of humans to sum small numbers over a long period of time.

The best allocation of resources would be for every one of us to consume as many bits as we want on a small number of devices; That's what our economy can produce. Instead the incentives are for us to consume a small number of bits on a large number of resource-intensive devices. The bit-sellers are hoping that they can commoditize the bit-makers by abstracting them away behind the veneer of their device and payment system, like we'll forget that beef comes from cows and not the grocery. All this for the minimal service of flipping some bits and processing a credit card. The net effect of this will be less content produced (with lower budgets,) less content consumed (at higher cost) and an endless stream of slightly shinier devices that contribute more in social status and momentary dopamine than actual marginal improvement.

Absent from all of this is any sort of coherent strategy on the part of the bit-makers. Their only apparent objective is to keep customers from getting used to buying cheap bits, oblivious to the fact that they are no longer even the ones selling the bits. The makers haven't yet realized that they have the power.

Imagine if the bit makers sold the bits themselves, or offered them DRM free through multiple sellers. The sellers would have to compete on convenience and price out of their diminishing margins. The maker would have a direct relationship with the customer, and might even end up with a respectable brand. With a diversity of sources, single-seller devices would become obviously broken by design and fail in the market. Bit-sellers would be revealed as nearly redundant, with makers at the center of the transaction. Instead they seem intent on squeezing blood from the stone of their existing customer relationships while letting their biggest threats move into comfortable positions.

The net effect for me is that buying media is uncomfortable. Even when it works, I feel like I'm participating in someone's machiavellian scheme. Amazon, I love your devices, but they don't read any of the bits I'm willing to buy. Please BBC, I would love to pay you for Planet Earth, but I have no intention of buying a bunch of redundant bit readers to do so. Useless hardware offends my aesthetics more than owning your bits can compensate for, and I'm not paying money for hardware that is defective by design.

The goal of copyright is to get people to pay for bits, and to pay people for making those bits. Its approach is to shoehorn it into the rest of the economy with a series of bizarre compromises that try to make bits become less bit-like. The associated notions of information "owning" are a tool, not an end. As bits have regained their natural state over the last few decades, we've done a horrible job of fulfilling the original goal. Most of the remaining money spent on bits is not getting spent on making those bits. Instead we're trying to come up with a new set of packages in which to put them, and all the strategy revolves around those packages instead of the bits themselves.

Meanwhile, we now have the technology and infrastructure to give all bits to all people. It's a tragedy that we don't.

Saturday, December 31, 2011

Fiction is now either Science Fiction or Historical Fiction. The present doesn't last long enough.

I just finished reading "The Wind up Bird Chronicle," and the plot of it requires that the main character be unreachable by phone when he is outside of his house. How different a world that was, where going out into the world to meet other people actually isolated you in some ways. This dated the novel entirely. It became a novel about sometime last century instead of just a novel.

Consider writing a story about someone who gets lost on a road trip or a walk. This is an archetypical setup, but how difficult it would be to do that today, to set that up in a way that rules out all the obvious ways of getting directions in an entirely uninteresting way from our smart phones? I can imagine it now: "My battery was too low to get signal, and between my two companions, one doesn't have a nationwide data plan, and the other is with a second tier carrier with poor 3g coverage, so miraculously, we have to talk to another person, and thus move the plot forward in an interesting way." Even after all those awkward contortions, that setup probably has a half-life of 5 years.

All of us spend a lot of our lives on our computers, but what we do on them can't be written about in a way that is both poetic and accurate. We just don't have enough words for it. Every humble tool in a leatherworker's arsenal has its own name (the awl for instance.) These things have been around for long enough for that to happen, and to gain the gravity that makes them candidates for metaphor. The pen is still mightier than the sword, even though we no longer use either. The keyboard may be mightier than the cruise missile, but I can't imagine saying that with any dramatic weight.

The basic ways we do common things are not only different, but changing from year to year. Henceforth a novel will have to choose a time period in which to take place, and choosing "now" will make it historical fiction by the time it is published.

Tuesday, March 08, 2011

Why big organizations don’t take risks proportionate to their size (a theoretical argument)

TLDR version: People optimize E(Log(x)). Big organizations should optimize E(Log(Σ x)), but because they are composed of many people, they optimize ΣE(log(x)).

Logarithmic Utility Curves

Suppose someone offers you a 50% chance of a $1M prize, or a 10% chance of a $10M prize. Most people who don’t already have a lot of money would take the first, more certain option, even though the expected value of the second is double that of the first. ($0.5M vs $1M). $1M would improve my life a lot. $10M would also improve my life a lot, but not so much more than $1M that I’m willing to risk getting nothing. Economists call this “risk aversion.” and model it using a “utility curve.” Though quite abstract, it corresponds pretty well to intuition. The idea is that $10M isn’t “worth” 10x as much to me as $1M, so I have to account for that before I take the expected value. The most common utility curve used in simple models is logarithmic, both because it’s mathematically simple, and close enough to reality for most purposes. Intuitively, no matter how much money I make, I’m willing to put in a linear amount of additional effort in order to raise my income level by 10%, so you end up with logarithmic utility.

To compare these two offers, before we take the expected value, we’ll take the log of the outcomes.
log(1M) ~ 6,
log(10M) ~ 7,
0.5 * 6 > 0.1 * 7, so we take the first offer as observed.

Rather than optimizing E(x), we optimize E(log(x)) and get behavior somewhat like what a real person would do.


It makes sense that an organization should have a utility curve looking like a log. Going out of business (log 0) is -infinity as observed, and companies care about percentage improvements rather than absolute improvements just like individuals do. I apologize for not having better arguments that this is the way organizations should behave. This is a blog post, not a research paper. :)

This means that if the output of each employee is x, the outcome for the company as a whole is Σ x, and the company should be optimizing E(log(Σ x)).

How do they actually behave? The company will behave in the way that the aggregate of its individuals behave. If individuals are rewarded in proportion to their personal outcomes rather than the company’s outcomes, they’ll behave by optimizing their personal utility function. As a result, the company as a whole will optimize Σ E(log(x)).

Big organizations apply the risk-aversion of an individual to losses that are teeny relative to the size of the organization, because people care more about their individual risk than the risk to the company. Ideally, a company should have many people working on huge improvements with a small probability of success. In reality, it's almost impossible to structure incentives so that doing things with a small chance of success is a good personal strategy. It’s hard to reward competence and not outcomes. If you reward outcomes, the company will be risk averse. Having a few engineers work for years on something that doesn’t finally work is a teeny risk to the company, but potentially a huge risk to the careers of those engineers.

Thursday, December 16, 2010

History through Google Books Ngrams

Each of these graphs plots over time the fraction that one word constitutes of all words in books mined from the Google Books project.

Westward expansion of the U.S.

One invested in railroads, the other, canals.

New religions of the last 200 years.


Note how people didn't start capitalizing "black" until the mid '60s, even though it had been used as a descriptor as often as "colored" for a long time. Note the different curves for "negress" and "Negress." Capital "Negress" rose in usage alongside "Negro woman" and was nearly as common in the '40s, but half as common in the '70s. Lowercase "negress" was mostly replaced by capitalized versions, which were then replaced as well.

Industrialization of food.

Pawpaws were more popular than blueberries, and gooseberries were more popular than raspberries!







Notice how HIV lags AIDS, and condom is correlated more with HIV than with AIDS.




Israel and Palestine as a people and as a place

The names of Muslims

It's 2:00 AM, and there's still worlds to explore just off the top of my head. This is a treasure trove. Google Books Team, this is an amazing accomplishment. I used to envision that this is how history would be done in 50 years when the digital age has ensured that anything that someone cares enough about to transfer is preserved. Now we're getting to do that sort of history, today.

Monday, July 19, 2010


The movie is great. Go see it. What I'm about to write will be entirely spoiler free.

Inception will leave you distrusting your own perceptions in the manner of Descartes's Demon, more so than The Matrix ever did. It does this I think because the experience of the characters in the movie entering and leaving dreams is so similar to our experience entering and leaving the movie. "Waking up" from a good movie is a very similar feeling to waking up from a dream.

When we talk about "suspending disbelief," it isn't supposed to be something you do, but rather something that happens automatically if the movie succeeds in drawing you in. When dreaming, we tolerate wild violations of physics and causality without it ever decreasing our emotional involvement. The objective of a good movie is to tap into that level of credulity, and it wouldn't surprise me if someone discovered that the same pathways in our brains are involved.

When Christopher Nolan was writing the dialogue about how addictive it is to be an architect of dreams, he must have been really talking about is how addictive it is to be an architect of shared dreams: movies.

Thursday, June 24, 2010

Men's Wearhouse is missing a major business opportunity.

Every male in the U.S. who goes to a prom or is someone's groomsman has likely been fitted for a tuxedo at the Men's Wearhouse. Theoretically, the Men's Wearhouse should have the most comprehensive database of men's sizing information of any company. There have been a lot of weddings among my close friends this year, and I assumed that after the first fitting I'd be able to rent subsequent tuxes without going to the store in person. Amazingly, according to one of the attendants, they throw away all information about the customer after 6 months.

This loss goes beyond convenient tuxedo rentals. With this much information about me, they could be delivering clothes custom-tailored overseas to my doorstep at a price no other company could match. That much opportunity is certainly worth the cost of a few dozen more machines. Ancillary data produced by your business can become more valuable than the profits from the business itself. Don't throw anything away.

Sunday, May 23, 2010

Janelle Monáe (Wow)

Imagine if Lauryn Hill became a geek, teamed up with Outkast, and wrote two concept albums about an android uprising in the futuristic city of Metropolis. The result would sound something like Janelle Monae's inaugural two albums, Metropolis, and The ArchAndroid, the first three acts of a six act story. The songs flow seamlessly (literally) from one to the next, usually jumping genres in the process. She can wail, she can scat, she can croon, she can rap, she can dance (oh she can dance), and she can sound like GLaDOS when necessary. Orchestral interludes bookend the chapters; In one, she puts words to a snippet of Claire De Lune.

Pitchfork loves her too. Historically, the intersection of the albums I like and the albums they bother to review has been approximately 0, so these two recommendations are about as independent as they come. Go have a listen! Every track can be heard for free at the links above.

My favorites so far: Sincerely, Jane, Tightrope, and Oh, Maker.