Tim Harford The Undercover Economist
  • THE UNDERCOVER ECONOMIST STRIKES BACK
    “Every Tim Harford book is cause for celebration. He makes the ‘dismal science’ seem like an awful lot of fun.”
    – Malcolm Gladwell, author of “The Tipping Point”
  • Adapt – Why Success Always Starts with Failure


    “A highly readable argument... Very impressive”
    – Nassim N Taleb, author of “The Black Swan”
  • Dear Undercover Economist
    “Harford has a knack for explaining economic principles and problems in plain language and, even better, for making them fun”
    – The New York Times
  • The Logic of Life
    “Highly readable, funny and daringly contentious... a whopping good time.”
    – The San Francisco Chronicle
  • The Undercover Economist
    “Required reading”
    – Stephen J. Dubner, co-author of “Freakonomics”
Marginalia

Ideas about the past, present and future of the economy

Books

Book of the week is James C Scott’s Against The Grain (UK) (US) – an examination of the origins of civilisation. Scott – best known for the magnificent Seeing Like A State (US) (UK) – is on fascinating form. There’s a fine long review by John Lanchester in the New Yorker.

I’ve been enjoying Ed Thorp’s A Man For All Markets (UK) (US).  Thorp is a quite brilliant thinker about both gambling and investment – he also built a wearable computer with Claude Shannon to predict the fall of the ball on a roulette table. So far this is a fascinating autobiography. Thought-provoking foreword by Nassim Taleb, too, who emphasises the simple practicality of Thorp’s approach.

Then there’s Paul Goodwin’s Forewarned (UK) (US) – which at first glance seems to be a great survey of what works and what doesn’t in the forecasting game. (It’s next on my list to read.)

 

Bro-casts

I’m going to admit to listening to The Art of Manliness and The Tim Ferriss Show, at least on occasion, because there are occasional gems. Check out this fascinating interview about the professor who taught Homer’s Odyssey to a class including his on octogenarian father – and what both the text and the class taught him about the relationship between fathers and sons. And here’s Mr Money Moustache on Ferriss’s podcast.

And not-at-all Bro-ish, but I loved this recent episode of The Why Factor about why we ask “so what do you do?” of strangers – and whether we can do better than that question. Wonderful radio.

 

The Search For the Fifty First Thing

If you’ve been enjoying the book / series of Fifty Things That Made the Modern Economy you can vote for one more special episode here (until noon GMT 6 October 2017) – the shortlist of six is worth a look!

Free email updates

(You can unsubscribe at any time)

18th of September, 2017MarginaliaComments off
Marginalia

Your chance to vote for the 51st thing that made the modern economy

It’s been such fun working on the radio series and book Fifty Things That Made the Modern Economy – but one of the frustrations was all the fascinating ideas, inventions and stories that I couldn’t squeeze into the book. Well, now there are six more on the table – and I’d love you to vote as to which of them will be the subject of one final episode.

The options are: credit cards, glass, the global positioning system, irrigation, the pencil, and spreadsheets. I chose this short-list of six from hundreds of suggestions that came in from BBC listeners.

So – please vote here before noon GMT on Friday 6 October. Or you could hold your fire until next weekend (23 September) at which point we’ll have a special podcast covering the six shortlisted ideas.

And if you’d like to pick up a copy of the book, it has received some lovely reviews. It’s out now in the UK and in the US (with the title Fifty Inventions That Shaped the Modern Economy).  Do feel free to order copies for all your friends…

Free email updates

(You can unsubscribe at any time)

16th of September, 2017MarginaliaComments off
Undercover Economist

The psychological biases that leave us unprepared for disaster

This column was written and first published a week before Hurricane Harvey struck the US coast. – TH

Who saw the global financial crisis coming, who didn’t and who deserved blame for the forecasting failure? After a decade of debating these questions, I wonder whether we shouldn’t be asking a different one: even if we had clearly seen the crisis coming, would it have made a difference? Perhaps — but perhaps not.

Consider New Orleans in 2004. With a terrible hurricane bearing down on the city, officials realised that the situation was grim. The levees were in disrepair and a storm surge could flood the low-lying city. A hundred thousand residents would be unable to evacuate without help, and not enough help was available. A plan was hatched to evacuate families to the Superdome, a sports stadium, but managers there warned that it simply could not house so many. If only there had been more warning of disaster.

Some readers will recall, though, that the catastrophe of Hurricane Katrina took place in 2005. The storm of 2004 was Hurricane Ivan, which, after lashing the Caribbean, weakened and turned aside from New Orleans. The city had been given almost a full year’s warning of the gaps in its defences.

The near miss led to much discussion but little action. When Hurricane Katrina hit the city, evacuation proved as impractical and the Superdome as inadequate as had been expected. The levees broke in more than 50 places, and about 1,500 people died. New Orleans was gutted. It was an awful failure but surely not a failure of forecasting.

Robert Meyer and Howard Kunreuther in The Ostrich Paradox (UK) (US) argue that it is common for institutions and ordinary citizens to make poor decisions in the face of foreseeable natural disasters, sometimes with tragic results. There are many reasons for this, including corruption, perverse incentives or political expediency. But the authors focus on psychological explanations. They identify cognitive rules of thumb that normally work well but serve us poorly in preparing for extreme events.

One such mental shortcut is what the authors term the “amnesia bias”, a tendency to focus on recent experience. We remember more distant catastrophes but we do not feel them viscerally. For example, many people bought flood insurance after watching the tragedy of Hurricane Katrina unfold, but within three years demand for flood insurance had fallen back to pre-Katrina levels.

We cut the same cognitive corners in finance. There are many historical examples of manias and panics but, while most of us know something about the great crash of 1929, or the tulip mania of 1637, those events have no emotional heft. Even the dotcom bubble of 1999-2001, which should at least have reminded everyone that financial markets do not always give sensible price signals, failed to make much impact on how regulators and market participants behaved. Six years was long enough for the lesson to lose its sting.

Another rule of thumb is “optimism bias”. We are often too optimistic, at least about our personal situation, even in the midst of a more generalised pessimism. In 1980, the psychologist Neil Weinstein published a study showing that people did not dwell on risks such as cancer or divorce. Yes, these things happen, Professor Weinstein’s subjects told him: they just won’t happen to me.

The same tendency was on display as Hurricane Sandy closed in on New Jersey in 2012. Robert Meyer found that residents of Atlantic City reckoned that the chance of being hit was more than 80 per cent. That was too gloomy: the National Hurricane Center put it at 32 per cent. Yet few people had plans to evacuate, and even those who had storm shutters often had no intention of installing them.

Surely even an optimist should have taken the precautions of installing the storm shutters? Why buy storm shutters if you do not erect them when a storm is coming? Messrs Meyer and Kunreuther point to “single action bias”: confronted with a worrying situation, taking one or two positive steps often feels enough. If you have already bought extra groceries and refuelled the family car, surely putting up cumbersome storm shutters is unnecessary?

Reading the psychological literature on heuristics and bias sometimes makes one feel too pessimistic. We do not always blunder. Individuals can make smart decisions, whether confronted with a hurricane or a retirement savings account. Financial markets do not often lose their minds. If they did, active investment managers might find it a little easier to outperform the tracker funds. Governments, too, can learn lessons and erect barriers against future trouble.

Still, because things often do work well, we forget. The old hands retire; bad memories lose their jolt; we grow cynical about false alarms. Yesterday’s prudence is today’s health-and-safety-gone-mad. Small wonder that, 10 years on, senior Federal Reserve official Stanley Fischer is having to warn against “extremely dangerous and extremely short-sighted” efforts to dismantle financial regulations. All of us, from time to time, prefer to stick our heads in the sand.

Written for and first published in the Financial Times on 18 August 2017.

My new book is “Fifty Inventions That Shaped The Modern Economy”. Grab yourself a copy in the US or in the UK (slightly different title) or through your local bookshop.

Free email updates

(You can unsubscribe at any time)

Marginalia

Undercover Monday – ideas about decision-making

A few interesting books have crossed my desk recently.

Garry Kasparov’s Deep Thinking (UK) (US) promises to reflect on “Where Machine Intelligence Ends and Human Creativity Begins”, although on that particular point it is not especially profound. Nevertheless Kasparov does say a lot that is interesting about innovation and risk-taking (like me he’s concerned that we’re favouring the marginal gain over riskier basic research) and there’s a terrific history of AI in chess. The heart of the book is an account of Kasparov’s battles with Deep Blue, and reads like a thriller. Great stuff.

Tali Sharot’s brand new The Influential Mind (UK) (US) discusses the social, emotional and rational cues that persuade us or deter us from taking action. It’s a familiar formula of anecdote, argument and research, but some of the research is new to me and it’s well-written and combined to good effect. Recommended.

Depressingly relevant at the moment is The Ostrich Paradox (UK) (US) by Meyer and Kunreuther; in a brief, expert book the author apply the cognitive biases literature (familiar from Kahneman and others) to disaster preparedness and crisis management. Very much focused on hurricanes and tsunamis but there’s much of relevance to other catastrophes (banking crises, industrial accidents) too.

 

And some great podcasts for your delectation. Tyler Cowen’s Conversations With Tyler is fascinating – he asks unusual and often revealing questions. The conversation with Kasparov was particularly good. Russ Roberts’s EconTalk is an old stalwart (I’ve been on twice with another appearance scheduled) but it’s often excellent. Two recent episodes – with John McWhorter on language and Benedict Evans on self-driving electric cars – were superb, perhaps because only tangentially related to economics.

 

Meanwhile the US edition of Fifty Inventions That Shaped The Modern Economy is out as of six days ago. Buy, buy! A few more days available to suggest what the 51st invention should be (details here) or pick up the UK edition here.

 

 

Free email updates

(You can unsubscribe at any time)


 

4th of September, 2017MarginaliaComments off
Highlights

What We Get Wrong About Technology

Blade Runner (1982) is a magnificent film, but there’s something odd about it. The heroine, Rachael, seems to be a beautiful young woman. In reality, she’s a piece of technology — an organic robot designed by the Tyrell Corporation. She has a lifelike mind, imbued with memories extracted from a human being.  So sophisticated is Rachael that she is impossible to distinguish from a human without specialised equipment; she even believes herself to be human. Los Angeles police detective Rick Deckard knows otherwise; in Rachael, Deckard is faced with an artificial intelligence so beguiling, he finds himself falling in love. Yet when he wants to invite Rachael out for a drink, what does he do?

He calls her up from a payphone.

There is something revealing about the contrast between the two technologies — the biotech miracle that is Rachael, and the graffiti-scrawled videophone that Deckard uses to talk to her. It’s not simply that Blade Runner fumbled its futurism by failing to anticipate the smartphone. That’s a forgivable slip, and Blade Runner is hardly the only film to make it. It’s that, when asked to think about how new inventions might shape the future, our imaginations tend to leap to technologies that are sophisticated beyond comprehension. We readily imagine cracking the secrets of artificial life, and downloading and uploading a human mind. Yet when asked to picture how everyday life might look in a society sophisticated enough to build such biological androids, our imaginations falter. Blade Runner audiences found it perfectly plausible that LA would look much the same, beyond the acquisition of some hovercars and a touch of noir.

Now is a perplexing time to be thinking about how technology shapes us. Some economists, disappointed by slow growth in productivity, fear the glory days are behind us. “The economic revolution of 1870 to 1970 was unique in human history,” writes Robert Gordon in The Rise and Fall of American Growth (UK) (US). “The pace of innovation since 1970 has not been as broad or as deep.” Others believe that exponential growth in computing power is about to unlock something special. Economists Erik Brynjolfsson and Andrew McAfee write of “the second machine age” (UK) (US), while the World Economic Forum’s Klaus Schwab favours the term “fourth industrial revolution”, following the upheavals of steam, electricity and computers. This coming revolution will be built on advances in artificial intelligence, robotics, virtual reality, nanotech, biotech, neurotech and a variety of other fields currently exciting venture capitalists.

Forecasting the future of technology has always been an entertaining but fruitless game. Nothing looks more dated than yesterday’s edition of Tomorrow’s World. But history can teach us something useful: not to fixate on the idea of the next big thing, the isolated technological miracle that utterly transforms some part of economic life with barely a ripple elsewhere. Instead, when we try to imagine the future, the past offers two lessons. First, the most influential new technologies are often humble and cheap. Mere affordability often counts for more than the beguiling complexity of an organic robot such as Rachael. Second, new inventions do not appear in isolation, as Rachael and her fellow androids did. Instead, as we struggle to use them to their best advantage, they profoundly reshape the societies around us.

 

 

To understand how humble, cheap inventions have shaped today’s world, picture a Bible — specifically, a Gutenberg Bible from the 1450s. The dense black Latin script, packed into twin blocks, makes every page a thing of beauty to rival the calligraphy of the monks. Except, of course, these pages were printed using the revolutionary movable type printing press. Gutenberg developed durable metal type that could be fixed firmly to print hundreds of copies of a page, then reused to print something entirely different.  The Gutenberg press is almost universally considered to be one of humanity’s defining inventions. It gave us the Reformation, the spread of science, and mass culture from the novel to the newspaper. But it would have been a Rachael — an isolated technological miracle, admirable for its ingenuity but leaving barely a ripple on the wider world — had it not been for a cheap and humble invention that is far more easily and often overlooked: paper.

The printing press didn’t require paper for technical reasons, but for economic ones. Gutenberg also printed a few copies of his Bible on parchment, the animal-skin product that had long served the needs of European scribes. But parchment was expensive — 250 sheep were required for a single book. When hardly anyone could read or write, that had not much mattered. Paper had been invented 1,500 years earlier in China and long used in the Arabic world, where literacy was common. Yet it had taken centuries to spread to Christian Europe, because illiterate Europe no more needed a cheap writing surface than it needed a cheap metal to make crowns and sceptres.

Paper caught on only when a commercial class started to need an everyday writing surface for contracts and accounts. “If 11th-century Europe had little use for paper,” writes Mark Kurlansky in his book Paper (UK) (US), “13th-century Europe was hungry for it.” When paper was embraced in Europe, it became arguably the continent’s earliest heavy industry. Fast-flowing streams (first in Fabriano, Italy, and then across the continent) powered massive drop-hammers that pounded cotton rags, which were being broken down by the ammonia from urine. The paper mills of Europe reeked, as dirty garments were pulped in a bath of human piss.

Paper opened the way for printing. The kind of print run that might justify the expense of a printing press could not be produced on parchment; it would require literally hundreds of thousands of animal skins. It was only when it became possible to mass-produce paper that it made sense to search for a way to mass-produce writing too. Not that writing is the only use for paper. In his book Stuff Matters (UK) (US), Mark Miodownik points out that we use paper for everything from filtering tea and coffee to decorating our walls. Paper gives us milk cartons, cereal packets and corrugated cardboard boxes. It can be sandpaper, wrapping paper or greaseproof paper. In quilted, perforated form, paper is soft, absorbent and cheap enough to wipe, well, anything you want. Toilet paper seems a long way from the printing revolution. And it is easily overlooked — as we occasionally discover in moments of inconvenience. But many world-changing inventions hide in plain sight in much the same way — too cheap to remark on, even as they quietly reorder everything. We might call this the “toilet-paper principle”.

 

 

It’s not hard to find examples of the toilet-paper principle, once you start to look. The American west was reshaped by the invention of barbed wire, which was marketed by the great salesman John Warne Gates with the slogan: “Lighter than air, stronger than whiskey, cheaper than dust.” Barbed wire enabled settlers to fence in vast areas of prairie cheaply. Joseph Glidden patented it in 1874; just six years later, his factory produced enough wire annually to circle the world 10 times over. Barbed wire’s only advantage over wooden fencing was its cost but that was quite sufficient to cage the wild west, where the simple invention prevented free-roaming bison and cowboys’ herds of cattle from trampling crops.  Once settlers could assert control over their land, they had the incentive to invest in and improve it. Without barbed wire, the American economy — and the trajectory of 20th-century history — might have looked very different.

There’s a similar story to be told about the global energy system. The Rachael of the energy world — the this-changes-everything invention, the stuff of dreams — is nuclear fusion. If we perfect this mind-bendingly complex technology, we might safely harvest almost limitless energy by fusing variants of hydrogen. It could happen: in France, the ITER fusion reactor is scheduled to be fully operational in 2035 at a cost of at least $20bn. If it works, it will achieve temperatures of 200 million degrees Celsius — yet will still only be an experimental plant, producing less power than a coal-fired plant, and only in 20-minute bursts. Meanwhile, cheap-and-cheerful solar power is quietly leading a very different energy revolution. Break-even costs of solar electricity have fallen by two-thirds in the past seven years, to levels barely more than those of natural gas plants. But this plunge has been driven less by any great technological breakthrough than by the humble methods familiar to anyone who shops at Ikea: simple modular products that have been manufactured at scale and that snap together quickly on site.

The problem with solar power is that the sun doesn’t always shine. And the solution that’s emerging is another cheap-and-cheerful, familiar technology: the battery. Lithium-ion batteries to store solar energy are becoming increasingly commonplace, and mass-market electric cars would represent a large battery on every driveway. Several giant factories are under construction, most notably a Tesla factory that promises to manufacture 35GWh worth of batteries each year by 2020; that is more than the entire global production of batteries in 2013. Battery prices have fallen as quickly as those of solar panels. Such Ikea-fication is a classic instance of toilet-paper technology: the same old stuff, only cheaper.

Perhaps the most famous instance of the toilet-paper principle is a corrugated steel box, 8ft wide, 8.5ft high and 40ft long. Since the shipping container system was introduced, world merchandise trade (the average of imports and exports) has expanded from about 10 per cent of world GDP in the late 1950s to more than 20 per cent today. We now take for granted that when we visit the shops, we’ll be surrounded by products from all over the globe, from Spanish tomatoes to Australian wine to Korean mobile phones.

“The standard container has all the romance of a tin can,” says historian Marc Levinson in his book The Box (UK) (US). Yet this simple no-frills system for moving things around has been a force for globalisation more powerful than the World Trade Organisation. Before the shipping container was introduced, a typical transatlantic cargo ship might contain 200,000 separate items, comprising many hundreds of different shipments, from food to letters to heavy machinery. Hauling and loading this cornucopia from the dockside, then packing it into the tightest corners of the hull, required skill, strength and bravery from the longshoremen, who would work on a single ship for days at a time. The container shipping system changed all that.

Loading and unloading a container ship is a gigantic ballet of steel cranes, choreographed by the computers that keep the vessel balanced and track each container through a global logistical system. But the fundamental technology that underpins it all could hardly be simpler. The shipping container is a 1950s invention using 1850s know-how. Since it was cheap, it worked. The container was a simple enough idea, and the man who masterminded its rise, Malcom McLean, could scarcely be described as an inventor. He was an entrepreneur who dreamed big, took bold risks, pinched pennies and deftly negotiated with regulators, port authorities and the unions.

McLean’s real achievement was in changing the system that surrounded his box: the way that ships, trucks and ports were designed. It takes a visionary to see how toilet-paper inventions can totally reshape systems; it’s easier for our limited imaginations to slot Rachael-like inventions into existing systems.  If nuclear fusion works, it neatly replaces coal, gas and nuclear fission in our familiar conception of the grid: providers make electricity, and sell it to us. Solar power and batteries are much more challenging. They’re quietly turning electricity companies into something closer to Uber or Airbnb — a platform connecting millions of small-scale providers and consumers of electricity, constantly balancing demand and supply.

 

 

Some technologies are truly revolutionary. They transcend the simple pragmatism of paper or barbed wire to produce effects that would have seemed miraculous to earlier generations. But they take time to reshape the economic systems around us — much more time than you might expect. No discovery fits that description more aptly than electricity, barely comprehended at the beginning of the 19th century but harnessed and commodified by its end. Usable light bulbs had appeared in the late 1870s, courtesy of Thomas Edison and Joseph Swan. In 1881, Edison built electricity-generating stations in New York and London and he began selling electricity as a commodity within a year. The first electric motors were used to drive manufacturing machinery a year after that. Yet the history of electricity in manufacturing poses a puzzle. Poised to take off in the late 1800s, electricity flopped as a source of mechanical power with almost no impact at all on 19th-century manufacturing. By 1900, electric motors were providing less than 5 per cent of mechanical drive power in American factories. Despite the best efforts of Edison, Nikola Tesla and George Westinghouse, manufacturing was still in the age of steam.

Productivity finally surged in US manufacturing only in the 1920s. The reason for the 30-year delay? The new electric motors only worked well when everything else changed too. Steam-powered factories had delivered power through awe-inspiring driveshafts, secondary shafts, belts, belt towers, and thousands of drip-oilers. The early efforts to introduce electricity merely replaced the single huge engine with a similarly large electric motor. Results were disappointing.

As the economic historian Paul David has argued, electricity triumphed only when factories themselves were reconfigured. The driveshafts were replaced by wires, the huge steam engine by dozens of small motors. Factories spread out, there was natural light. Stripped of the driveshafts, the ceilings could be used to support pulleys and cranes. Workers had responsibility for their own machines; they needed better training and better pay. The electric motor was a wonderful invention, once we changed all the everyday details that surrounded it.

David suggested in 1990 that what was true of electric motors might also prove true of computers: that we had yet to see the full economic benefits because we had yet to work out how to reshape our economy to take advantage of them. Later research by economists Erik Brynjolfsson and Lorin Hitt backed up the idea: they found that companies that had merely invested in computers in the 1990s had seen few benefits, but those that had also reorganised — decentralising, outsourcing and customising their products — had seen productivity soar.

Overall, the productivity statistics have yet to display anything like a 1920s breakthrough. In that respect we are still waiting for David’s suggestion to bear fruit. But in other ways, he was proved right almost immediately. People were beginning to figure out new ways to use computers and, in August 1991, Tim Berners-Lee posted his code for the world wide web on the internet so that others could download it and start to tinker. It was another cheap and unassuming technology, and it unlocked the potential of the older and grander internet itself.

 

 

If the fourth industrial revolution delivers on its promise, what lies ahead? Super-intelligent AI, perhaps? Killer robots? Telepathy: Elon Musk’s company, Neuralink, is on the case. Nanobots that live in our blood, zapping tumours? Perhaps, finally, Rachael? The toilet-paper principle suggests that we should be paying as much attention to the cheapest technologies as to the most sophisticated. One candidate: cheap sensors and cheap internet connections. There are multiple sensors in every smartphone, but increasingly they’re everywhere, from jet engines to the soil of Californian almond farms — spotting patterns, fixing problems and eking out efficiency gains. They are also a potential privacy and security nightmare, as we’re dimly starting to realise — from hackable pacemakers to botnets comprised of printers to, inevitably, internet-enabled sex toys that leak the most intimate data imaginable. Both the potential and the pitfalls are spectacular.

Whatever the technologies of the future turn out to be, they are likely to demand that, like the factories of the early 20th century, we change to accommodate them. Genuinely revolutionary inventions live up to their name: they change almost everything, and such transformations are by their nature hard to predict. One clarifying idea has been proposed by economists Daron Acemoglu and David Autor. They argue that when we study the impact of technology on the workplace, we should view work in bite-sized chunks — tasks rather than jobs.

For example, running a supermarket involves many tasks — stacking the shelves, collecting money from customers, making change, and preventing shoplifters. Automation has had a big impact on supermarkets, but not because the machines have simply replaced human jobs. Instead, they have replaced tasks done by humans, generally the tasks that could be most easily codified. The barcode turned stocktaking from a human task into one performed by computers. (It is another toilet-paper invention, cheap and ubiquitous, and one that made little difference until retail formats and supply chains were reshaped to take advantage.)

A task-based analysis of labour and automation suggests that jobs themselves aren’t going away any time soon — and that distinctively human skills will be at a premium. When humans and computers work together, says Autor, the computers handle the “routine, codifiable tasks” while amplifying the capabilities of the humans, such as “problem-solving skills, adaptability and creativity”. But there are also signs that new technologies have polarised the labour market, with more demand for both the high-end skills and the low-end ones, and a hollowing out in the middle. If human skills are now so valuable, that low-end growth seems like a puzzle — but the truth is that many distinctively human skills are not at the high end. While Jane Austen, Albert Einstein and Pablo Picasso exhibited human skills, so does the hotel maid who scrubs the toilet and changes the bed. We’re human by virtue not just of our brains, but our sharp eyes and clever fingers.

So one invention I’m keen to observe is the “Jennifer unit”, made by a company called Lucas Systems. Jennifer and the many other programmes like her are examples of a “voice-directed application” — just software and a simple, inexpensive earpiece. Such systems have become part of life for warehouse workers: a voice in their ear or instructions on a screen tell them where to go and what to do, down to the fine details. If 13 items must be collected from a shelf, Jennifer will tell the human worker to pick five, then five, then three. “Pick 13” would lead to mistakes. That makes sense. Computers are good at counting and scheduling. Humans are good at picking things off shelves. Why not unbundle the task and give the conscious thinking to the computer, and the mindless grabbing to the human? Like paper, Jennifer is inexpensive and easy to overlook. And like the electric dynamo, the technologies in Jennifer are having an impact because they enable managers to reshape the workplace. Science fiction has taught us to fear superhuman robots such as Rachael; perhaps we should be more afraid of Jennifer.

 

 
Written for and first published in the FT Magazine on 8 July 2017.

My new book is “Fifty Things That Made The Modern Economy” – now out! Grab yourself a copy in the US (slightly different title) or in the UK or through your local bookshop.

Free email updates

(You can unsubscribe at any time)

29th of August, 2017HighlightsOther WritingComments off
Marginalia

Publication Day!

50things-hb-us-205x300

Loyal readers will be aware that the UK edition of Fifty Inventions That Shaped The Modern Economy is already out (under a subtly different name) but I’m delighted to announce publication of the US edition today. Enjoy! The Wall Street Journal says that the book is “great fun” and while Kirkus says it’s “hard to resist”, and who am I to argue?

Thank you to everyone who’s pre-ordered a copy or reviewed it somewhere on the internet. It’s a great day to order another copy or three for all your friends via Amazon, your local bookshop – or wherever you get your books. More details here.

I loved writing this book and I hope you love reading it.

29th of August, 2017MarginaliaComments off
Marginalia

What underrated idea or invention most shaped the modern economy?

It’s been such fun working on the radio series and book Fifty Things That Made the Modern Economy – but one of the frustrations was all the fascinating ideas, inventions and stories that I couldn’t squeeze into the book.

I get another bite of the cherry now: the BBC is inviting suggestions for a special episode: one more thing that shaped the economic forces that surround us and changed the way we live, spend or work. Full details here, but the gist is: please send your suggestions to email hidden; JavaScript is required (or the BBC World Service Twitter or Facebook accounts) by noon GMT on Friday 8 September. (Please don’t tweet at me directly – I will almost certainly miss your suggestion, which would be a shame.)

Please search your brains for the surprising and the overlooked. The original list of 50 didn’t include the motor car or the computer, so of course we could do that – but I suspect there’s a more intriguing story to tell.

There are more details about the book here – it’s out now in the UK and next week in the US (with the title Fifty Inventions That Shaped the Modern Economy).  Do feel free to order copies for all your friends…

Free email updates

(You can unsubscribe at any time)

21st of August, 2017MarginaliaRadioComments off
Undercover Economist

Challenge is all too easily ducked by today’s knowledge workers

“The man whose whole life is spent in performing a few simple operations, of which the effects, too, are perhaps always the same . . . generally becomes as stupid and ignorant as it is possible for a human creature to become.” This anxiety about the stupefying effects of cog-in-a-machine manufacturing sounds like a line from Karl Marx. It is, in fact, from Adam Smith’s The Wealth of Nations.

As the anniversary of Smith’s death was this week, it seemed like a good moment to reflect on the Scottish philosopher’s warning about the deadening effect of repetitive work. Smith knew that specialisation and the division of labour weren’t about to disappear, so he advocated publicly funded schools as a path to more fulfilling work and leisure.

The emergence of mass production lines made Smith’s words seem prophetic; but many repetitive jobs have since been taken by machines. So, has his warning about stultifying work been rendered obsolete?

The Wealth of Nations is almost a quarter of a millennium old, and we should not expect every word to ring true today. But correctly read, Smith’s anxiety continues to resonate — and not just for people with repetitive jobs, but knowledge workers too.

The modern knowledge worker — a programmer, a lawyer, a newspaper columnist — might appear inoculated from Smith’s concern. We face not monotony but the temptations of endless variety, with the entire internet just a click away. All too easily, though, we can be pulled into the soothing cycle of what slot-machine designers call a “ludic loop”, repeating the same actions again and again. Check email. Check Facebook. Check Instagram. Check Twitter. Check email. Repeat.

Smith would not have dreamt of a smartphone, but what is a ludic loop but “performing a few simple operations, of which the effects, too, are perhaps always the same”?

Smith was concerned about jobs that provided no mental challenge: if problems or surprises never arose, then a worker “has no occasion to exert his understanding, or to exercise his invention, in . . . removing difficulties which never occur.”

For the modern knowledge worker, the problem is not that the work lacks challenge, but that the challenge is easily ducked. This point is powerfully made by computer scientist Cal Newport in his book Deep Work (US) (UK). Work that matters is often difficult. It can be absorbing in mid-flow and satisfying in retrospect, but it is intimidating and headache-inducing and full of false starts.

Email is easier. And reading Newport’s book I realised that email posed a double temptation: not only is it an instant release from a hard task, but it even seems like work. Being an email ninja looks professional and seems professional — but all too often, it is displacement activity for the work that really matters.

A curious echo of Smith’s warning comes in Robert Twigger’s new book Micromastery (US) (UK). Mr Twigger sings the praises of mastering one small skill at a time: not how to cook, but how to make the perfect omelette; not how to build a log cabin, but how to chop a log. There is much to be said for this. We go deep — as Newport demands — but these sharp spikes of skill are satisfying, not too hard to acquire and a path to true expertise.

They also provide variety. “Simply growing up in the premodern period guaranteed a polymathic background,” writes Twigger. To prosper in the premodern era required many different skills; a smart person would be able to see a problem from many angles. A craft-based, practical upbringing means creative thinking comes naturally. “It is only as we surge towards greater specialisation and mechanisation that we begin to talk about creativity and innovation.”

I draw three lessons from all this. The first is that learning matters. Smith wanted schooling for all; Twigger urges us to keep schooling ourselves. Both are right.

The second is that serious work requires real effort, and it can be tempting to duck that effort. Having the freedom to avoid strenuous thinking is a privilege I am glad to have — but I am happier when I don’t abuse that freedom.

The third lesson is that old-fashioned craft offered us something special. To Smith it was the challenge that came from solving unpredictable problems. To Twigger it is the variety of having to do many small things well. To Newport, it is the flow that comes from deep immersion in a skill that requires mastery. Perhaps all three mean the same thing.

Smith realised that the coming industrial age threatened these special joys of work. The post-industrial age threatens them too, in a rather different way. Fortunately, we have choices.

“The understandings of the greater part of men are necessarily formed by their ordinary employments,” wrote Smith. So whether at work or at play, let us take care that we employ ourselves wisely.

 

Written for and first published in the Financial Times on 21 July 2017.

My new book is “Fifty Things That Made The Modern Economy” – out last week in the UK and coming in a few days in the US. Grab yourself a copy in the US (slightly different title) or in the UK or through your local bookshop.

Free email updates

(You can unsubscribe at any time)

Marginalia

Remembering the holocaust

Over the past few weeks I’ve been reading some books about the holocaust. I never dreamed that all this would become so relevant.

Art Spiegelman’s graphic memoir Maus (UK) (US) is brilliant, devastating, and occasionally very funny. Spiegelman’s father and mother, Vladek and Anja, survived Auschwitz against dreadful odds. Anja later killed herself. The contrast between the elderly Vladek – weak, needy, apparently socially clueless – and the younger Vladek – strong, ingenious, and socially nimble – is striking. And the details come alive in Spiegelman’s brutally direct telling.

Elie Wiesel’s Night (UK) (US) seems to be required reading in the US but I’d not read it until recently. It’s simple, excellent, unremittingly bleak. I think the figure of Moishe the Beadle – who has witnessed an atrocity but cannot get any of his fellow Jews to believe him – is the most tragic I’ve ever encountered. Grim and brilliant.

Viktor Frankl’s Man’s Search For Meaning (UK) (US) has, I’m told, changed people’s lives. Like Wiesel, Frankl survived life the camps. Unlike Wiesel he has a message of inspiration and redemption. It’s an interesting contrast. (Both books are very short.)

Then there’s Anne Frank’s Diary of a Young Girl. (UK) (US) It’s heartbreaking.

I’m glad I read these books. I’ll be reading others – histories as well as memoirs.

17th of August, 2017MarginaliaResourcesComments off
Undercover Economist

Think like a supermodel if you want to win from the gig economy

Are we misunderstanding the endgame of the annoyingly named “gig economy”? At the behest of the UK government, Matthew Taylor’s review of modern working practices was published this week. The title could easily have graced a report from the 1930s, and the review is in many ways a conservative document, seeking to be “up to date” while preserving “enduring principles of fairness”.

Mr Taylor, chief executive of the RSA and a former policy adviser to the Blair government, wants to tweak the system. One proposal is to sharpen up the status of people who are neither employees nor freelancers, calling them “dependent contractors” and giving them some employment rights. In the US, economists such as Alan Krueger — formerly the chairman of Barack Obama’s Council of Economic Advisers — proposed similar reforms.

There is nothing wrong with this; incremental reform is often wise. Quaint ideas such as the employer-employee relationship are not yet obsolete. Yet they might yet become so, at least in some industries. If they do, I am not sure we will be ready. The obsolescence I have in mind was anticipated by Silicon Valley’s favourite economist, Ronald Coase. Back in 1937, a young Coase wrote “The Nature of the Firm”, calling attention to something strange: while corporations competed within a competitive marketplace, corporations themselves were not markets. They were hierarchies. If you work for a company, you don’t allocate your time to the highest bidder. You do what your boss tells you; she does what her boss tells her. A few companies dabble with internal marketplaces, but mostly they are islands of command-and-control surrounded by a sea of market transactions.

Coase pointed out that the border between hierarchy and market is a choice. Corporations could extend their hierarchy by merging with a supplier. Or they could rely more on markets, spinning off subsidiaries or outsourcing functions from cleaning and catering to IT and human resources. Different companies make different choices and the ones that choose efficiently will survive.

So what is the efficient choice? That depends on the nature of the job to be done. A carmaker may well want to have the engine manufacturer in-house, but will happily buy bulbs for the headlights from the cheapest bidder.

But the choice between hierarchy and market also depends on the technology deployed to co-ordinate activity. Different technologies favour different ways of doing things. The bar code made life easier for big-box retailers. While eBay favoured the little guy, connecting buyers and sellers of niche products.

Smartphones have allowed companies such as Uber and Deliveroo to take critical middle-management functions — motivating staff, evaluating and rewarding performance, scheduling and co-ordination — and replace them with an algorithm. But gig workers could install their own software, telling it where they like to work, what they like to do, when they’re available, unavailable, or open to persuasion. My app — call it GigBot — could talk to the Lyft app and the TaskRabbit app and the Deliveroo app, and interrupt me only when an offer deserves attention.

Not every job can be broken down into microtasks that can be rented out by the minute, but we might be surprised at how many can. Remember that old line from supermodel Linda Evangelista, “We don’t wake up for less than $10,000 a day”? GigBot will talk to your alarm clock; $10 or $10,000, just name the price that would tempt you from your lie-in.

It is easy to imagine a dystopian scenario in which a few companies hook us in like slot-machine addicts, grind us in circles like cogs, and pimp us around for pennies. But it is not too hard to imagine a world in which skilled workers wrest back control using open-source software agents, join electronic guilds or unions and enjoy a serious income alongside unprecedented autonomy.

Nothing empowers a worker like the ability to walk out and take a better offer; in principle the gig economy offers exactly that. Indeed both scenarios may come true simultaneously, with one type of gig for the lucky ones, and another for ordinary folk.

If we are to take the best advantage of a true gig economy, we need to prepare for more radical change. Governments have been content to use corporations as delivery mechanisms for benefits that include pensions, parental leave, sick leave, holidays and sometimes healthcare — not to mention the minimum wage. This isn’t unreasonable; even a well-paid freelancer may be unable to buy decent private insurance or healthcare. Many of us struggle to save for a pension. But if freelancers really do start to dominate economic activity — if — the idea of providing benefits mostly through employers will break down.

We will need governments to provide essential benefits, perhaps minimalist, perhaps generous, to all citizens. Above that safety net, we need portable benefits — mentioned warmly but briefly by Mr Taylor — so that even a 10-minute gig helps to fill a pension pot or earn time towards a holiday. Traditional corporate jobs have been socially useful, but if you push any model too far from reality, it will snap.

 
Written for and first published in the Financial Times on 14 July 2017.

My new book is “Fifty Things That Made The Modern Economy” – out now week in the UK and coming very soon in the US. Grab yourself a copy in the US (slightly different title) or in the UK or through your local bookshop.

Free email updates

(You can unsubscribe at any time)

Previous Next

Elsewhere

  • 1 Twitter
  • 2 Flickr
  • 3 RSS
  • 4 YouTube
  • 5 Podcasts
  • 6 Facebook

Books

  • Fifty Inventions That Shaped the Modern Economy
  • Messy
  • The Undercover Economist Strikes Back
  • Adapt
  • Dear Undercover Economist
  • The Logic of Life
  • The Undercover Economist

Search by Keyword

About Tim

Tim Harford is an author, columnist for the Financial Times and presenter of Radio 4's "More or Less".
Learn More ›

Tim’s Tweets

Free Email Updates

Enter your email address to receive notifications of new articles by email (you can unsubscribe at any time).

Join 155,844 other subscribers

Website Malware Scan
Do NOT follow this link or you will be banned from the site!