The four anti-pillars of Marxism

Those who don't understand history are doomed to repeat it.... And those who do are doomed to watch in horror. 

In recent years, I've watched in horror Marxism seemingly coming back in fashion, as if we're in the 1920s. Too many people lack the practical experience, theoretical context,  or intelligence to know the lessons of the last 100 years. 

The seven pillars of wisdom in Christianity or the seven pillars of Islam are things you should build on. With Marxism, we have some seductive big ideas that you should not build on. I call them anti-pillars.  I won't explain them since many great people have before. I'll just list them as pointers.

1. Economic calculation problem and the fallacy of central planning.  

It is not just about having better computers or more data. The information in an economic system doesn't exist in one place or time, it is distributed. Furthermore, even if you had it all at once, much of it is not explicitly manifest but rather implicit preferences.

2. The labor theory of value is wrong

It is not just labor vs capital, there is also value and, more subtly there is quality.  If I spend an hour on the piano and Mozart spends an hour, it's one hour of labor. But there is a subjective difference in value. And an objective difference in price that others will pay for it. Finally, there is something that is neither objective nor subjective, beyond dialectics, namely quality.

3. The class struggle is a static one dimensional model, but human economic relationships are dynamic and multidimensional. 

This may have been subtle in the 19th century, but in the 21st century, it should completely obvious.  In fact even in the 20th century, class was often cynically replaced by ethnicity or religion by various revolutionary Marxists hungry for power. Lenin used "nations, nationalities and peoples" when he realized Russia was not industrialized enough for Marx's class structure. Ethiopian Marxist-Leninists adopted the same hack 3/4 of a century later. 

4. A political system based on class struggle necessarily evolves into an escalating war of purity. In this process, the most ruthless sociopaths, the self-appointed revolutionary vanguard, always end up as the rulers. Which is why almost every Marxist state converges on a violent totalitarian government.

If you are ever about to be to be seduced, at least know these anti-pillars, and spend a small amount of time understanding them.

Optimism

A few months ago, I stumbled across a business card left behind on a table. Under the name of the company, it had three words, each followed by a period,  representing, I guess, the three pillars of their "corporate values".  One word struck me: Optimism.   I must have snickered,  because someone asked what was up. I instinctively thought "optimism" was a silly value, but it dawned on me that I had never thought about it explicitly.

Is optimism good?

The question sounds strange because Optimism, today, in American culture, is automatically assumed to be A Good Thing. Like "pro-active". People use that word as if it's synonymous with "good".  E.g. Person A: "Don't do this bad thing." Person B: "It's not bad, it's pro-active!"  Noooo....  Just like sometimes, being pro-active is evil, being optimistic is not automatically good.

Let's define optimism as follows: Having high expectations for a positive outcome. That is to say, compared to most "normal" people's probability distribution of outcomes, yours has more weight on the positive side. Say we both bet on the same horse, and one of us thinks we'll lose and one thinks we'll win.  So when is it good to be the optimist?  I would slice it on three levels:

1. Of course if you turn out to be right, then great... But that just means you got lucky.
2. What if you had to make the same choice over and over again, and on average the optimistic view is more accurate? Great, but that's not really optimism, it's having a better probabilistic model, better foresight.
3. Now what if you believe the same probabilities as everyone else, but you are more willing to take the risky choices and eventually you're better off? You are good at taking the right amount of risk for reward, and if in the long run you are better off (technically i.e. if you are on the efficiency frontier in the risk, reward plane),  then ... well that's good judgement. 

But in all these forms, the optimism is situational! The are plenty of situations where the wise person would take the "pessimistic" position.   Thus, as a fundamental value to live by, "optimism" is actually orthogonal to the things we consider good, truthful etc.

People (including Corporations!) of the world, listen to me: Value luck, foresight or judgement.  Not optimism.  That's just silly.

 

Known unknowns and unknown unknowns

A lot of people made fun of poor Donald Rumsfeld for his infamous quote..

"Reports that say that something hasn't happened are always interesting to me, because as we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns -- the ones we don't know we don't know."

But actually, he had a very good point. There are things that have uncertainty but we know the shape of the uncertainty. For example, I don't know who will the lottery tomorrow, but we do know the probability of any one person winning, or the distribution of winning amounts. And by the way from that we do know that playing the lottery is one of the dumbest activities known to man, though it is a kind of stupidity that we can harness for good perhaps... but I digress. My point is the outcome of the lottery is a known unknown. Which is different type of ignorance than say, not knowing if God exists. There you don't even have a probability space to support a distribution. Once someone asked to me: What's the probability that God exists? Obviously it was a rhetorical question, and it assumed the answer is "very low" (the question came from an atheist). But then I was like: it could be 0.01% or 99.99% or anything. If you have to choose, it might as well be 42.

Manipulation of prediction markets

Nice post on manipulation of prediction markets: ...manipulation can improve (!) prediction markets - the reason is that manipulation offers informed investors a free lunch.

Nice also to see our old friend Hanson.

Electoral markets

In my last entry about prediction markets vs polls, I quoted and linked to some aggregate numbers from Intrade for the US presidential election. Now there's Electoral markets, a website called that displays the prediction markets at the state level. Cool stuff! I came across it in a blog entry that sums it up quite well.

Predictions, elections, polls, fractals, reflixivity & the kitchen sink

People argue about whether prediction markets do a better job of forecasting elections than polls, or it's an illusion due to timing.

Initially, I am inclined to believe this is one area where the market works better. This follows from their most basic properties. Let's assume both are mostly mediocre. That is many polls and prediction markets available, but just no good in general.

Now consider polls. If there was fewer of them, and they were well communicated, we could count on the fact that expert from all sides would scrutinize them and that they would thus be held to the highest standards. Or of course if you average a lot of polls, you should get a more accurate poll of polls, as errors cancel out. In both cases, centralization increases accuracy of polls. Conversely, when looking at any one poll alone chances are, the one you're looking at is a bad/biased one.

For markets on the other hand, even if you are looking at one market alone, if it was biased, all it would take is one person who has seen the other markets to arbitrage the bias away, in effect linking the two markets and making them two views of one more accurate underlying market. Two polls cannot get organically linked and become more accurate than each by itself. You have to add them up yourself. But two markets can! Thus any one market you stumble upon is more likely to be accurate than a poll you stumble across.

This argument seems particularly apt for the US presidential elections, since there's so much slicing and dicing... The polls are all complicated what-if scenarios. So anyway, according to Intrade, which I've written about before, here are the current probabilities for the next US President (taking bid prices, to get lower bounds):

• Obama: 55.6%
• McCain: 37.6%
• Clinton: 6.6%

And the Iowa Electronic Markets seem to agree. Thus, the above, in my humble opinion, is as close as you're gonna get to a prediction out there today.

But is it any good?

Getting back to the philosophical argument again... polls are trying to measure current feelings, i.e. they assume there's an underlying "true" preference of the public, and that they are an objective mechanism to reveal it, within a certain Gaussian error. But it could of course be that the error is much larger than we think possible, because the models are completely wrong. As Nassim Nicholas Taleb, the author of Black Swan, that I mentioned here a couple of posts ago, has argued, a lot of mistakes are due to imposing Gaussian models on a reality that has fractal or power-law or heavy-tailed scaling. For polls, if you think there is a true current preference, then I guess the error should be Gaussian (in other words, using Taleb's lingo, the preference is "in mediocristan"). But looking at it over time, as you must for a prediction, maybe a single poll of a few thousand people, even if it's not representing a wider reality, can have a fractal effect, replicating it's belief patterns at larger scales, through media. If that' s the case, most polls will be meaningless, some will be virally important. And prediction markets won't work well either. True the participants size can scale so maybe they can make fractal bets, but no matter how many expert bets the market brings in, it won't improve the information about a black swan type event which is what a fractally scaling popularity would be.

Some people, like George Soros in his recent book (that I just picked up this weekend) argue that, when it comes to human/social phenomena, the underlying reality doesn't exist separately, it is entangled with human attempts to understand it, and manipulate it (he calls it reflexivity). So taking his ideas to polls, are they measuring something that fundamentally may not actually exist? Probably, there's no objective public opinion that exists independently, waiting to be measured. But it exists reflexively (this is my interpretation/application of Soros idea here so sorry if it's wrong). The polls, even if totally arbitrary to start with, by being communicated, may induce the reality they purport to measure. People listen to the news, and the polls, and their future actions are affected in some way, may then come to act in the way that is suggested to them by the polls for people like them. It may or may not be controlled in concentrated way, but if we apply this theory, then polls are as much instruments of action as measurements, in robotic terms, as much actuators as sensors.

Wisdom of crowds revisited: intrade

Aha! Search engine futures by Intrade. One year after Google and wisdom of crowds, the idea is catching on.

Hanson & Drexler

I'd like to make a note on Robin Hanson who is really great. So is K. Eric Drexler. Or at least they have some really interesting ideas and ways of thinking.. I should look into what they've been up to since I last read their stuff way back in 90s.

Nemo propheta in patria sua?

The bible says: No one is a prophet in his homeland (Luke 4:24 , John 4:44). This is one of my favorite proverbs. I first heard it in the Bob Marley song Survival, towards the end he says: A good man is never honored in his own country. In the Latin version (the title of this entry), it says literally: Nemo is a prophet in his own country, hehe... but I digress.

Today that proverb is about to be tested -- for a good man is now seeking honor (in the form of elective office) from the people of his own country. In Bangladesh Muhammad Yunus has entered politics. If I had to draw up a list of people on earth who should be in politics for the benefit of mankind, then this guy would definitely be near the top. Good luck sir!

Google and wisdom of crowds

Google is Putting crowd wisdom to work. Seems like all the great ideas take about 10 years longer than expected. Of course there was Admiral Ponidexter's terrorism prediction market which was suggested after Sept 11... I first heard if as "Idea Futures", way back in the mid-90s, which someone was goingn to commercialize, but somehow it never worked out. Oh wait ... Foresight Exchange

Google is taking all these good ideas lying around. I guess that's the real secret. Innovation is not like a gold rush, the ideas are there in plain sight. You just have to pick them up one by one, when you are ready, and polish them up. Of course it helps if you are very smart, and have an unbelievable cash flow because you were disciplined about your first idea.

So the question now is, why can't Google use the "wisdom of crowds" inherent in the search engine? Of course selling search ads is a form of that. But I mean in the predictive sense. To take a very crude example, if you know the key words searched by people from a particular company, then that could tell you something about what that company is doing. Not in any direct way of course like: the CEO searched for "bankrupcy law". But in a massive way with tiny correlations being detected in mountains of data.... Oh wait how do we know they are not already doing it?

wikipedia

I just read an article about wikipedia (New Yorker magazine, July 31, 2006. Alongside the usual praise, it captures some pretty good criticisms:

"Wikipedia has gone from a nearly perfect anarchy to an anarchy with gang rules."

"...infested with moonbats."

"...the open-source model is simply inapplicatible to an encyclopedia. For Software, there is an objective standar: either it works or it doesn't. There is no such test for truth."

Hmmmmm. Aren't we forgetting that other pillar of epistomiological virtue? Popper would say there's natural selection, the market, and ... voting.

So why not add voting to Wikipedia? Like Digg, each article would be voted on by users, and therefore have a score. Each reader would get a binary vote, thumbs up (+1) or thumbs down (-1). Uniqueness of votes can be easily enforced by IP address for each article. The article's score is then simply the sum of all the votes (+1 and -1). This score would of course help the reader adopt the appropriate degree of scepticism.

But the score could also be used in a derivative way. One of the problems on Wikipedia is situations where two contributors get into a big battle if repeteadly deleting the other's changes because say the article is on a controversial topic, or simply because whoever is wrong is stubborn or fanatical... Well each contributor could have a an editor rank based on the value they have added to articles they haved edited in the past (which would be something like the average change in score of the articles before and after their edits), and presto, in a dispute, the person with the higher rank, which should the one proven more reliable over time, wins! Truth wins, and Wikipedia lives happily ever after....

Seems simple enough... Why not? Imagime Ebay without the seller rankings... Yaiks.