The state as entrepreneur: did Uncle Sam invent the iPhone?

December 10, 2017

Our free enterprise system is what drives innovation. But because it’s not always profitable for companies to invest in basic research, throughout our history, our government has provided cutting-edge scientists and inventors with the support that they need. That’s what planted the seeds for the Internet. That’s what helped make possible things like computer chips and GPS. Just think of all the good jobs — from manufacturing to retail — that have come from these breakthroughs. Barack Obama

 The foundational figure in the development of the iPhone wasn’t Steve Jobs. It was Uncle Sam. Every single one of these twelve key technologies was supported in significant ways by governments—often the American government. Tim Harford Fifty Inventions That Shaped the Modern Economy

In my blog post last week featuring my favourite parts of the latest Tim Harford book Fifty Inventions That Shaped the Modern Economy I included part of his essay on the iPhone. What was interesting about this piece was the importance of government spending on this iconic symbol of capitalism. The essay was based on the work of Mariana Mazzucato. This Italian economist, an eloquent exponent for an activist state industrial policy, believes that that the government should play a key role in directing investment. This is what is known in economics as picking winners. She states her case in a famous 2013 book The Entrepreneurial State. Along with other left-leaning economists, such as Joseph Stiglitz, Simon Wren-Lewis, and Thomas Piketty, she also served as an advisor to Jeremy Corbyn.

I think that there are a number of fallacies here. In Obama’s famous “You didn’t build that” speech he asserts that says Government research created the Internet so that all the companies could make money off the Internet. No, the military created the internet as a way of communicating in a nuclear war. It was the genius of the market system that found uses that its inventors would never have imagined. Technological progress in itself does not add new products to the shelves by itself. This is confusing technology with actually bringing a product that consumers will actually want to the market. Entrepreneurship involves much more that inventing technology. The feedback mechanism of the market is what directs investment. Ultimately, as economist Don Boudreaux has pointed out, market entrepreneurship is far scarcer than is infrastructure.

I am not blind to the role that the government can play in correcting market failures. It may well be true that the private sector will be reluctant to invest in the kind of basic research which will not produce immediate results. And I do think that big companies should pay more taxes. They should not be able to get away with the arbitrage; their tax avoidance schemes are an outrage. But beyond this I am sceptical about the further role of the government.

I can think of plenty of examples of governments picking winners. In my youth we had such things as British Leyland and Concorde. Indeed there was a threat to put Marks & Spencer into public ownership. Governments face perverse incentives. In Spain we have had a number of airports with no passengers. This is what happens when you are spending other people’s money. It’s easy to idolize government. You just need to focus on what it claims it will do, rather than what it actually does.

I am not a market fundamentalist. The government does have an important role in creating an environment where ideas can flourish. The kind of basic research I mentioned above is an example of a role a government can play. You could also give companies tax incentives to do their own fundamental research. I am, however, sceptical of the role that those such as Mazzucato want to give government. Her research has undoubtedly been influential. A headline in the Huffington Post last year proclaimed: The Real Creator of the Apple Watch Wasn’t Steve Jobs, It Was Uncle Sam. I would argue that that is fake news.

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Here is Obama’s famous “You didn’t build that” speech:

    If you were successful, somebody along the line gave you some help. There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you’ve got a business — you didn’t build that. Somebody else made that happen. The Internet didn’t get invented on its own. Government research created the Internet so that all the companies could make money off the Internet.

    The point is, is that when we succeed, we succeed because of our individual initiative, but also because we do things together. There are some things, just like fighting fires, we don’t do on our own. I mean, imagine if everybody had their own fire service. That would be a hard way to organize fighting fires.

    So we say to ourselves, ever since the founding of this country, you know what, there are some things we do better together. That’s how we funded the GI Bill. That’s how we created the middle class. That’s how we built the Golden Gate Bridge or the Hoover Dam. That’s how we invented the Internet. That’s how we sent a man to the moon. We rise or fall together as one nation and as one people, and that’s the reason I’m running for President — because I still believe in that idea. You’re not on your own, we’re in this together.

 

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Fifty Inventions That Shaped the Modern Economy

December 3, 2017

 

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Recently BBC Radio 4 the series Fifty Inventions That Shaped the Modern Economy finished. There were fifty inventions chosen by the economist Tim Harford and one from the listeners. Harford’s eight-minute, 1200-word audio essays have now been turned into a book. The book is full of fascinating nuggets of trivia and important economic insights. Here is my selection:

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Google

The media’s scramble for new business models is one obvious economic impact of Google search. But the invention of functional search technology has created value in many ways. A few years ago, consultants at McKinsey tried to list the most important. There are time savings. Studies suggest that googling is about three times as quick as finding information in a library, and that’s before you count the time spent travelling to the library. Likewise, finding a business online is about three times faster than using a traditional, printed directory such as the Yellow Pages. McKinsey put the productivity gains into the hundreds of billions.

TV Dinner

American families spend more and more on eating outside the home—on fast food, restaurant meals, sandwiches, and snacks. In the 1960s, only a quarter of food spending was on food prepared and eaten outside the home; it’s been rising steadily since then, and in 2015 a landmark was reached: for the first time in their history, Americans spent more on food and drink consumed outside the home than on food and beverages purchased at grocery stores. In case you think Americans are unusual in that, the British passed that particular milestone more than a decade earlier.

The data are clear that the washing machine didn’t save a lot of time, because before the washing machine we didn’t wash clothes very often. When it took all day to wash and dry a few shirts, people would use replaceable collars and cuffs or dark outer layers to hide the grime on their clothes. But we cannot skip many meals in the way that we can skip the laundry. When it took two or three hours to prepare a meal, that was a job someone had to take the time to do. The washing machine didn’t save much time, and the ready meal did, because we were willing to stink, but we weren’t willing to starve.

The Pill

The answer is that by giving women control over their fertility, the pill allowed them to invest in their careers. Before the pill was available, taking five years or more to qualify as a doctor or a lawyer did not look like a good use of time and money. To reap the benefits of those courses, a woman would need to be able to reliably delay becoming a mother until she was thirty at least—having a baby would derail her studies or delay her professional progress at a critical time. A sexually active woman who tried to become a doctor, dentist, or lawyer was doing the equivalent of building a factory in an earthquake zone: just one bit of bad luck and the expensive investment would be trashed.

Of course, women could have simply abstained from sex if they wanted to study for a professional career. But many women didn’t want to. And that decision wasn’t just about having fun; it was also about finding a husband. Before the pill, people married young. A woman who decided to abstain from sex while developing her career might try to find a husband at the age of thirty and find that, quite literally, all the good men had been taken.

The pill changed those dynamics. It meant that unmarried women could have sex with substantially less risk of an unwanted pregnancy. But it also changed the whole pattern of marriage. People—particularly people with college educations—started to marry later. Why hurry? Even women who didn’t use the pill found that they didn’t have to rush into marriage, either, because there would still be plenty of single men to marry a little later in life. The babies started to arrive later, and at a time that women chose for themselves. And that meant that women, at least, had time to establish professional careers.

Video games

In 2016, four economists presented research into a puzzling fact about the U.S. labour market: the economy was growing strongly, unemployment rates were low, and yet a surprisingly large number of able-bodied young men were either working part-time or not working at all. More puzzling still, while most studies of unemployment find that it makes people thoroughly miserable, against expectations the happiness of these young men was rising. The researchers concluded that the explanation was . . . well, they were living at home, sponging off their parents, and playing video games. These young men were deciding they didn’t want to be a Starbucks server. Being a starship captain was far more appealing.

Air-conditioning

Without air-conditioning, glass-fronted skyscrapers are not a sensible option: you’d bake on the upper floors. With air-conditioning, old workarounds become irrelevant and new building designs become possible.

Air-conditioning has changed demographics, too. Without it, it’s hard to imagine the rise of cities such as Houston, Phoenix, or Atlanta, as well as Dubai or Singapore. As new housing spread rapidly across America in the second half of the twentieth century, population boomed in the Sun Belt—the warmer south of the country, from Florida to California—from 28 percent of Americans to 40 percent. As retirees in particular moved from north to south, they also changed the nation’s political balance: the author Steven Johnson has plausibly argued that air-conditioning elected Ronald Reagan.

Reagan became president in 1980. Back then, America alone, with just five percent of the world’s population, used more than half the world’s air-conditioning. Emerging economies have since caught up quickly: China will soon become the global leader. The proportion of air-conditioned homes in Chinese cities jumped from under one-tenth to more than two-thirds in just ten years. In countries such as India, Brazil, and Indonesia, the market for air conditioners is expanding at double-digit rates. And there’s plenty more room for growth: from Manila to Kinshasa, eleven of the world’s thirty largest cities are in the tropics.

Bar code

But over time it became apparent that the bar code was changing the tilt of the playing field in favour of a certain kind of retailer. For a small, family-run convenience store, the bar code scanner was an expensive solution to problems the store didn’t really have. But big-box supermarkets could spread the cost of the scanners across many more sales. Such stores value shorter lines at the checkout. They need to keep track of inventory. With a manual checkout, a shop assistant might charge a customer for a product, then slip the cash into her pocket without registering the sale. With a bar code and scanner system, such behaviour can be pretty conspicuous. And in the 1970s, a time of high inflation in America, bar codes let supermarkets change the price of products by sticking a new price tag on the shelf rather than on each item.

It’s hardly surprising that as the bar code spread across retailing in the 1970s and 1980s, big-box retailers also expanded. The scanner data underpinned customer databases and loyalty cards. By tracking and automating inventory, it made just-in-time deliveries more attractive and lowered the cost of having a wide variety of products. Shops in general, and supermarkets in particular, started to generalize—selling flowers, clothes, and electronic products. Running a huge, diversified, logistically complex operation was all so much easier in the world of the bar code.

Perhaps the ultimate expression of that fact came in 1988—when the discount department store Wal-Mart decided to start selling food. It is now the largest grocery chain in America—and by far the largest general retailer on the planet, about as large as its five closest rivals combined.8 Wal-Mart was an early adopter of the bar code and has continued to invest in cutting-edge computer-driven logistics and inventory management.

The cold chain

The cold chain is one of the pillars of the global trading system. As we’ve seen, the shipping container made long-distance commerce cheaper, quicker, and more predictable. The bar code helped huge, diverse retailers keep track of complex supply chains. The diesel engine made huge oceangoing ships amazingly efficient.

The cold chain took all these other inventions and extended their reach to perishables. Now meat, fruit, and vegetables were subject to the economic logic of global specialization and global trade. Yes, you can grow French beans in France—but perhaps you should fly them in from Uganda. Different growing conditions mean this kind of shipping can make both economic and environmental sense. One study found it was eco-friendlier to grow tomatoes in Spain and transport them to Sweden than it was to grow them in Sweden. Another claimed that raising a lamb in New Zealand and shipping it to England emits less greenhouse gas than raising a lamb in England.

The Billy bookcase

And that’s what seems to explain the enduring popularity of the Billy bookcase. “Simple, practical and timeless” is how Gillis Lundgren once described the designs he hoped to create; and the Billy is surprisingly well accepted by the type of people you might expect to be sniffy about mass-produced MDF. Sophie Donelson edits the interiors magazine House Beautiful. She told AdWeek the Billy is “unfussy” and “unfettered,” and “modern without trying too hard.”

Furniture designer Matthew Hilton praises an interesting quality of the Billy: anonymity. Interior design expert Mat Sanders agrees, declaring that IKEA is “a great place for basic you can really dress up to make feel high-end.” The Billy’s a bare-bones, functional bookshelf if that’s all you want from it, or it’s a blank canvas for creativity: on ikeahackers.net you’ll see it repurposed as everything from a wine rack to a room divider to a baby-changing station.

But business and supply-chain nerds don’t admire the Billy bookcase for its modernity or flexibility. They admire it—and IKEA in general—for relentlessly finding ways to cut costs and prices without reducing the quality of its products. That is why the Billy is a symbol of how innovation in the modern economy isn’t just about snazzy new technologies, but also boringly efficient systems. The Billy bookcase isn’t innovative in the way that the iPhone is innovative. The innovations are about working within the limits of production and logistics, finding tiny ways to shave more off the cost, all while producing something that looks inoffensive and does the job.

Intellectual property

The modern form of intellectual property originated, like so many things, in fifteenth-century Venice. Venetian patents were explicitly designed to encourage innovation. They applied consistent rules: the inventor would automatically receive a patent if the invention was useful; the patent was temporary, but while it lasted it could be sold, transferred, or even inherited; the patent would be forfeited if it wasn’t used; and the patent would be invalidated if the invention proved to be closely based on some previous idea. These are all very modern ideas.

And they soon created very modern problems. During the British industrial revolution, for example, the great engineer James Watt figured out a better way to design a steam engine. He spent months developing a prototype, but then put even more effort into securing a patent. His influential business partner, Matthew Boulton, even got the patent extended by lobbying Parliament. Boulton and Watt used it to extract licensing fees and crush rivals—among them Jonathan Hornblower, who made a superior steam engine yet found himself ruined and imprisoned.

The iphone

Ask yourself: What actually makes an iPhone an iPhone? It’s partly the cool design, the user interface, the attention to details in the way the software works and the hardware feels. But underneath the charming surface of the iPhone are some critical elements that made it, and all the other smartphones, possible.

The economist Mariana Mazzucato has made a list of twelve key technologies that make smartphones work. One: tiny microprocessors. Two: memory chips. Three: solid state hard drives. Four: liquid crystal displays. Five: lithium-based batteries. That’s the hardware.

Then there are the networks and the software.

Continuing the count: Six: fast-Fourier-transform algorithms. These are clever bits of math that make it possible to swiftly turn analogue signals such as sound, visible light and radio waves into digital signals that a computer can handle.

Seven—and you might have heard of this one: the Internet. A smartphone isn’t a smartphone without the Internet.

Eight: HTTP and HTML, the languages and protocols that turned the hard-to-use Internet into the easy-to-access World Wide Web. Nine: cellular networks. Otherwise your smartphone not only isn’t smart, it’s not even a phone. Ten: global positioning systems, or GPS. Eleven: the touchscreen. Twelve: Siri, the voice-activated artificial-intelligence agent.

All of these technologies are important components of what makes an iPhone, or any smartphone, work. Some of them are not just important but indispensable. But when Mariana Mazzucato assembled this list of technologies and reviewed their history, she found something striking. The foundational figure in the development of the iPhone wasn’t Steve Jobs. It was Uncle Sam. Every single one of these twelve key technologies was supported in significant ways by governments—often the American government.

The bank

The Knights Templar were warrior monks: they were a religious order, with a theologically inspired hierarchy, mission statement, and code of ethics. But they were also heavily armed and dedicated to a holy war. How did those guys get into the banking game?

The Templars dedicated themselves to the defence of Christian pilgrims to Jerusalem. In 1099, with the First Crusade, Jerusalem had been captured from the Fatimid Caliphate, and pilgrims began to stream in, travelling thousands of miles across Europe. And if you are a Christian pilgrim, you have a problem: you need to somehow fund months of food and transport and accommodation, yet you also want to avoid carrying huge sums around, because that makes you a target for robbers. Fortunately, the Templars had that covered. A pilgrim could deposit funds at Temple Church in London and withdraw them in Jerusalem. Instead of carrying a purse stuffed with money, he’d carry a letter of credit. The Knights Templar were the Western Union of the Crusades.

We don’t actually know how the Templars made this system work and protected themselves against fraud. Was there a secret code verifying the document and the identity of the traveller? We can only guess. But that wouldn’t be the only mystery to shroud the Templars, an organization sufficiently steeped in legend that Dan Brown set a scene of The Da Vinci Code in Temple Church.

…The Knights Templar did much more than transfer money across long distances. They provided a range of recognizably modern financial services. If you wanted to purchase a nice island off the west coast of France—as King Henry III of England did in the 1200s with Oléron, northwest of Bordeaux—the Templars could broker the deal. Henry paid £200 a year for five years to the Temple in London, and when his men took possession of Oléron, the Templars made sure that the island’s previous owner was paid. Oh, and the Crown Jewels of England, stored today at the Tower of London? In the 1200s, the Crown Jewels were stored at the Temple—security on a loan. That was the Templars operating as a very high-end pawnbroker.

The Knights Templar weren’t Europe’s bank forever, of course. The order lost its reason to exist after European Christians completely lost control of Jerusalem in 1244; the Templars were eventually disbanded in 1312.

Razors and blades

The model of cheap razors and expensive blades evolved only later, as Gillette’s patents expired and competitors got in on the act. Today two-part pricing is everywhere. Consider the PlayStation. Every time Sony sells one, it loses money: the retail price is less than it costs to manufacture and distribute. But that’s okay with Sony, because Sony coins it in whenever a PlayStation 4 owner buys a game. Or how about Nespresso? Nestlé makes its money not from the machine, but from the coffee pods.

For this model to work you need some way to prevent customers putting cheap, generic blades in your razor. One solution is legal: patent-protect your blades. But patents don’t last forever. Patents on coffee pods have started expiring, so brands like Nespresso now face competitors selling cheap, compatible alternatives. Some companies are looking for another kind of solution: technological. Just as other companies’ games don’t work on the PlayStation, some coffee companies have put chip readers in their machines to stop you from trying to brew a generic cup of joe.

Two-part pricing models work by imposing what economists call “switching costs.” Want to brew another brand’s coffee? Then buy another machine. Two-part pricing is especially prevalent with digital goods. If you have a huge library of games for your PlayStation or books for your Kindle, it’s no small thing to switch to another platform.

Switching costs don’t have to be just financial. They can come in the form of time or hassle. Say I’m already familiar with Photoshop; I might prefer to pay for an expensive upgrade than buy a cheaper alternative to it, which I would then have to learn how to use. That’s why software vendors offer free trials. It’s also why service providers (anything from your gym to your cable provider) offer special “teaser” rates to draw people in: when they quietly raise their prices or make the terms and conditions less attractive, many customers won’t bother to change.

Tax havens

The economist Gabriel Zucman came up with an ingenious way to estimate the wealth hidden in the offshore banking system. In theory, if you add up the assets and liabilities reported by every global financial centre, the books should balance—but they don’t. Each individual centre tends to report more liabilities than assets. Zucman crunched the numbers and found that globally, total liabilities were 8 percent higher than total assets. That suggests at least 8 percent of the world’s wealth is illegally unreported. Other methods have come up with even higher estimates.

The problem is particularly acute in developing countries. For example, Zucman finds that 30 percent of wealth in Africa is hidden offshore. He calculates an annual loss of $14 billion in tax revenue. That would build plenty of schools and hospitals.

Zucman’s solution is transparency: creating a global register of who owns what, to end banking secrecy and anonymity-preserving shell corporations and trusts. That might well help with tax evasion. But tax avoidance is a subtler and more complex problem.

To see why, imagine I own a bakery in Belgium, a dairy in Denmark, and a sandwich shop in Slovenia. I sell a cheese sandwich, making one euro of profit. On how much of that profit should I pay tax in Slovenia, where I sold the sandwich; or Denmark, where I made the cheese; or Belgium, where I baked the bread? There’s no obvious answer. As rising taxes met increasing globalization in the 1920s, the League of Nations devised protocols for handling such questions. They allow companies some leeway to choose where to book their profits. There’s a case for that, but it opened the door to some dubious accounting tricks. One widely reported example may be apocryphal, but it illustrates the logical extreme of these practices: A company in Trinidad apparently sold ballpoint pens to a sister company for $8,500 apiece. The result: more profit booked in low-tax Trinidad; less in higher-tax regimes elsewhere.

Most such tricks are less obvious, and consequently harder to quantify. Still, Zucman estimates that 55 percent of U.S.-based companies’ profits are routed through some unlikely-looking jurisdiction such as Luxembourg or Bermuda, costing the U.S. government $130 billion a year. Another estimate puts the losses to governments in developing countries at many times the amount they receive in foreign aid.

Leaded petrol

And what of the scientist who first put lead in gasoline? By all accounts, Thomas Midgley was a genial man; he may even have believed his own spin about the safety of a daily hand-wash in tetraethyl lead. But as an inventor, his inspirations seem to have been cursed. His second major contribution to civilization was the chlorofluorocarbon, or CFC. It improved refrigerators, but destroyed the ozone layer.

In middle age, afflicted by polio, Midgley applied his inventor’s mind to lifting his weakened body out of bed. He devised an ingenious system of pulleys and strings. One day they tangled around his neck and killed him.

Paper

Today, paper is increasingly made out of paper itself—often recycled, appropriately enough, in China. A cardboard box emerges from the paper mills of Ningbo, 130 miles south of Shanghai; it’s used to package a laptop computer; the box is shipped across the Pacific; the laptop is extracted, and the box is thrown into a recycling bin in Seattle. Then it’s shipped back to Ningbo, to be pulped and turned into another box. The process can be repeated six or seven times before the paper fibres themselves become weak and unusable.

When it comes to writing, though, some say paper’s days are numbered—that the computer will usher in the age of the “paperless office.” The trouble is, the paperless office has been predicted since Thomas Edison in the late nineteenth century. Remember those wax cylinders, the technology that ushered in recorded music and introduced an age of vast inequality of musicians’ incomes? Edison thought they’d be used to replace paper: office memos would be recorded on his wax cylinders instead. Even Thomas Edison wasn’t right about everything—and when it comes to the death of paper, many other prognosticators have been made to look like fools.

The idea of the paperless office really caught on as computers started to enter the workplace in the 1970s, and it was repeated in breathless futurologists’ reports for the next quarter of a century. Meanwhile, paper sales stubbornly continued to boom: yes, computers made it easy to distribute documents without paper, but computer printers made it equally easy for the recipients to put them on paper anyway. America’s copiers, fax machines, and printers continued to spew out enough sheets of ordinary office paper to cover the country every five years. After a while, the idea of the paperless office became less of a prediction and more of a punchline.

Perhaps habits are finally changing: In 2013, the world hit peak paper. Many of us may still prefer the feel of a book or a physical newspaper to swiping a screen, but the cost of digital distribution is now so much lower, we often go for the cheaper option. Finally, digital is doing to paper what paper did to parchment with the help of the Gutenberg press: outcompeting it, not on quality, but on price.

Paper may be on the decline, but it’s hard to imagine it disappearing any more than the wheel itself is likely to disappear. It will survive not just on the supermarket shelf or beside the lavatory, but in the office, too. Old technologies have a habit of enduring. We still use pencils and candles. The world still produces more bicycles than cars. Paper was never just a home for the beautiful typesetting of a Gutenberg Bible; it was everyday stuff. And for jottings, lists, and doodles, you still can’t beat the back of an envelope.

Paper money

For governments, fiat money represents a temptation: a government with bills to pay can simply print more money. And when more money chases the same amount of goods and services, prices go up. The temptation quickly proved too great to resist. Within a few decades of its invention in the early eleventh century, the jiaozi was devalued and discredited, trading at just 10 percent of its face value.

Other countries have since suffered much worse. Weimar Germany and Zimbabwe are famous examples of economies collapsing into chaos as excessive money-printing rendered prices meaningless. In Hungary in 1946, prices trebled every day. Walk into a Budapest café back then, and it was better to pay for your coffee when you arrived, not when you left.

These rare but terrifying episodes have convinced some economic radicals that fiat money can never be stable: they yearn for a return to the days of the gold standard, when paper money could be redeemed for a little piece of precious metal. But mainstream economists generally now believe that pegging the money supply to gold is a terrible idea. Most regard low and predictable inflation as no problem at all—perhaps even a useful lubricant to economic activity because it guards against the possibility of deflation, which can be economically disastrous. And while we may not always be able to trust central bankers to print just the right amount of new money, it probably makes more sense than trusting miners to dig up just the right amount of new gold.

Insurance

Then, in 1687, a coffeehouse opened on Tower Street, near the London docks. It was comfortable and spacious, and business boomed. Patrons enjoyed the fire; tea, coffee, and sherbet; and, of course, the gossip. There was a lot to gossip about: London had recently experienced the Great Plague, the Great Fire, the Dutch navy sailing up the Thames, and a revolution that had overthrown the king.

But above all, the regulars at this coffeehouse loved to gossip about ships: what was sailing from where, with what cargo—and whether it would arrive safely or not. And where there was gossip, there was an opportunity for a wager. The patrons loved to bet. They bet, for instance, on whether Admiral John Byng would be shot for his incompetence in a naval battle with the French (he was). The gentlemen of Lloyd’s would have had no qualms about taking my bet on my own life.

The proprietor saw that his customers were as thirsty for information to fuel their bets and gossip as they were for coffee, and so he began to assemble a network of informants and a newsletter full of information about foreign ports, tides, and the comings and goings of ships. His name was Edward Lloyd. His newsletter became known as Lloyd’s List. Lloyd’s coffeehouse hosted ship auctions, and gatherings of sea captains who would share stories. And if someone wished to insure a ship, that could be done, too: a contract would be drawn up, and the insurer would sign his name underneath—hence the term “underwriter.” It became hard to say quite where coffeehouse gambling ended and formal insurance began.

Naturally, underwriters congregated where they could be best informed, because they needed the finest possible grasp of the risks they were buying and selling. Eight decades after Lloyd had established his coffeehouse, a group of underwriters who hung out there formed the Society of Lloyd’s. Today, Lloyd’s of London is one of the most famous names in insurance.

 


The Pizzagate scandal

November 26, 2017

 

This week’s post is about Pizzagate, one of those fake news stories that emerged in 2016 in the month leading up to the presidential election. It is one of those stories that I was vaguely aware of, but I did not know many of the facts. Luckily I heard a podcast from Reveal which looked into this bizarre conspiracy. In Pizzagate: A slice of fake news the podcaster teamed up with Rolling Stone and The Investigative Fund “to explore how fake news starts, snowballs and sometimes erupts into gunfire.” The cast of characters includes chairman of the 2016 Hillary Clinton presidential campaign, the alt-right, a famous conspiracy theorist, a performance artist, Madeleine McCann and an actor/writer who decided to take the law into his own hands.

“My NYPD source said it’s much more vile and serious. We’re talking an international child enslavement and sex ring. Not even Hillary’s most ardent supporters and defenders will be able to excuse this!”

The first clue comes from this Facebook post by Carmen Katz that went up on October 29th, last year, just ten days before the election. The reporters saw that Carmen’s profile said that she lived in Joplin, Missouri. Unable to find Carmen Katz in the phone book, they found her real name Cynthia Campbell. They were eventually able to talk to her. She denied any involvement, claiming that her Facebook account had been hacked. Later though her attitude changed and she accused the journalists of the hacking and threatened to sue them.

The starting point for the conspiracy theory goes back to the thousands of hacked the Democratic Party’s emails from the man running the campaign John Podesta. In Podesta’s emails, there are a few references to pizza and a couple of references to Comet Ping Pong, an establishment whose owner Podesta knew, and where Democrats would hold fundraisers. The emails did made lots of references to pizza. Conspiracy theorists on Reddit knew that this had to be some kind of code. Of course it was – cheese pizza had to stand for child pornography.

The story slowly began to gather momentum. Carmen Katz’s original tweet appeared on the Twitter account at David Goldberg in New York. Given the name and that the photo for his avatar was of a man with a large Photoshopped nose, it seems more like an anti-Semitic meme used by White Supremacists. Be that as it may, the post was shared at least 6,000 times on Twitter and was subsequently picked up by a fake news site.YourNewsWire.com.

The story then goes international. The reporter goes off to Macedonia. There in Veles, a depressed former factory town we meet Borcha Pechev, a man who earns a bit of extra cash setting up fake news sites, for which he charges 100 Euro at a time. Veles is said to be the fake news capital of the world. They don’t actually invent fake news there; they just copy and paste it from American fake news sites. And they do not have it in for Hillary – this is strictly a business.

The story was still doing the rounds on the fringes when on November 2nd Alex Jones’s Infowars programme. I have mentioned Mr Jones in previous posts. Trump is known to be a fan. His most notorious claims are probably that 9/11 was a hoax and that nobody actually died in the Sandy Hook shooting. One guest on alleged that there was a child slave colony on Mars. Despite this, or maybe because of this, his show has excellent ratings and he gave the Pizzagate claims fresh impetus.

This particular episode featured an interview with Doug Hagmann, a private investigator from Erie, Pennsylvania. He claimed that:

All of the components are here to expose the greatest perversion, the greatest satanic, and I mean satanic, cabal of people that are associated with Hilary Clinton. And the people in the halls of our power in the United States.

It later emerges that he has no evidence to back up his claim. Jones would eventually apologise for his role in Pizzagate.

You would have thought that Trump winning the election would have seen the story die.  But that didn’t stop the spread of Pizzagate. It actually grew after the election. The story got became huge in Turkey, where it has been suggested that the Islamist conservative Justice and Development Party government wanted to distract attraction from a recent child abuse scandal and from controversial pending legislation on child marriage, which would have made a child rape no longer punishable if the perpetrator offered to marry his victim.

Jack Posobiec, a thirtysomething, an American alt-right activist, went to Comet Ping-Pong, where he used Periscope to live-stream an investigation of the Pizzagate conspiracy theory. When he tried to broadcast a child’s birthday party being held in a back room of the restaurant, he was asked to leave.  A New York Times story, which restaurant owner James Alefantis hoped would help debunk the story proved counterproductive. And of course Russia was involved.

A 28-year-old actor/writer (he has a credit for a film on the IMDB) from North Carolina, Edgar Maddison Welch, had become obsessed with the paedophile cabal. It was his duty to save all those innocent kids On December 4th, 2016, armed with a handgun and a semiautomatic rifle, he decided to drive from his home state the miles to the nation’s capital. On the way, he made a suicide video: “girls, I love you all more than anything in this world.” Once he had arrived at Comet Ping Pong restaurant, he started looking for the basement. All he could find was a locked door. He shot it up only to discover, there was no basement. And there were no kids either. He then surrendered to a SWAT team,

After the incident, Michael Flynn Jr., son of Trump’s short-lived National Security Advisor, Michael T. Flynn, and also a member of Trump’s transition team, tweeted:

Until #Pizzagate proven to be false, it’ll remain a story. The left seems to forget #PodestaEmails and the many “coincidences” tied to it. This tweet may well have been the reason why Flynn Jr. was forced out of Trump’s transition team on December 6, 2016

Welch and he was arraigned on federal charges and pled guilty. Now, his life, and his family’s life, is ruined. The restaurant owner, James Alefantis has also had his life is changed forever by this. The death threats have continued. I really don’t think this wacky conspiracy theory decided the election, but it does show a crazy idea can take on a life of its own. This is nothing new, but social media has made its impact even greater.

 

_______

 

1) And what about the performance artist I mentioned in my introduction. The artist in question is Marina Abramović. She was close to John and Tony Podesta. One of the Wikileaks emails referred to a 1996 performance piece Spirit Cooking:

Dear Tony,

I’m so looking forward to the Spirit Cooking dinner at my place. Do you think you would be able to let me know if your brother’s joining?

All my love, Marina

In the oeuvre Abramović wrote a series of absurd dark self-help mantras phrases on the walls of a gallery in pig’s blood. The phrases included:

 Fresh morning urine. Sprinkle over nightmare dreams.”

 “With a sharp knife, cut deeply into the middle finger of your left hand. Eat the pain.”

 “Mix fresh breast milk with fresh sperm milk. Drink on earthquake nights.”

 “Sitting on a copper chair. Comb your hair with a clear quartz crystal brush, until your memory is released.”

This tied in with the conspiracy theories.

2) According to Wikipedia, conspiracy theorists claimed John and Tony Podesta kidnapped Madeleine McCann. They claim that the brothers were in Portugal at the time of the kidnapping. The source was the conspiracy website Victurus Libertas, which has also argued that Queen Elizabeth II is a reptilian.


The words they are a changin’: why it’s OK to use literally to mean figuatively

November 19, 2017

We laugh at the elixir that promises to prolong life to a thousand years; and with equal justice may the lexicographer be derided, who being able to produce no example of a nation that has preserved their words and phrases from mutability; shall imagine that his dictionary can embalm his language, and secure it from corruption and decay. Samuel Johnson

Maybe some prefer their flowers pressed dry in books. There are those with affectionate feelings toward the inflatable doll and the corpse. Surely, though, most of us seek life. Language, too, lives. We must take a deep breath and, like the people initially so put off by Darwinism, embrace reality, this time linguistic. Among the many benefits of doing so: wonder replaces disgust, curiosity replaces condemnation, and overall, you have a lot more fun. John McWhorter from Words on the Move: Why English Won’t – and Can’t – Sit Still (Like, Literally).

I have recently finished reading John McWhorter’s 2016 book on how the meanings of words evolve: Words on the Move: Why English Won’t – and Can’t – Sit Still (Like, Literally). It is a book that looks at the way the meanings of words have changed and are changing right now. His central thesis is that we should be a lot more relaxed about what is going on. The book is full of revealing insights and you find yourself stopping every two or three pages, wowed by McWhorter’s latest gem. The linguist loves to analogise. He invokes fade-out endings in pop music, pre-ripped blue jeans, tool sheds, fads in baby names, junk DNA, living squid in the ocean vs. dead squid in a kitchen and the Victorian party game of creating a tableau vivant to get his ideas across.

The use of literally is one thing that is guaranteed to get any self-respecting pedant’s blood boiling. Thee word originally was another variation on indicating truth, more specifically exactness, as in “by the letter”. But words are not pressed flowers and it was inevitably going to morph into other meanings. As McWhorter points out, literally in its original meaning of by the letter no longer makes sense except as a metaphor. We were literally the only ones there; we were literally on the brink of a depression. There are no letters involved. Literally began to get more personal. It has become a way of venting, of attesting to the vividness of our personal sentiments when we are describing an experience we have had. I was literally dying of thirst. This is an area of language called pragmatics, the study of meaning in the interactional context, looking beyond literal meanings of words. Literally has become a discourse marker, a way to flag sincerity.

OK, so the meaning of words drift, but what irritates people is that this current use of literally is the direct opposite of what it should mean. But this is not unusual in the English language. There is an interesting category of words and phrases called contronyms, terms that, depending on context, can have opposite or contradictory meanings. Literally is one of them. The website Daily Writing Tips has an excellent list of 75 such terms. Here is a selection of other contronyms:

Apology: A statement of contrition for an action, or a defence of one

Bolt: To secure, or to flee

Bound: Heading to a destination, or restrained from movement

Buckle: To connect, or to break or collapse

Cleave: To adhere, or to separate

Custom: A common practice, or a special treatment

Dust: To add fine particles, or to remove them

Fast: Quick, or stuck or made stable

Fine: Excellent, or acceptable or good enough

First degree: Most severe in the case of a murder charge, or least severe in reference to a burn

Fix: To repair, or to castrate

Flog: To promote persistently, or to criticize or beat

Handicap: An advantage provided to ensure equality, or a disadvantage that prevents equal achievement

Hold up: To support, or to impede

Left: Remained, or departed

Mean: Average or stingy, or excellent

Off: Deactivated, or activated, as an alarm

Out: Visible, as with stars showing in the sky, or invisible, in reference to lights

Out of: Outside, or inside, as in working out of a specific office

Overlook: To supervise, or to neglect

Oversight: Monitoring, or failing to oversee

Peer: A person of the nobility, or an equal

Quantum: Significantly large, or a minuscule part

Quite: Rather (as a qualifying modifier), or completely

Rent: To purchase use of something, or to sell use

Sanction: To approve, or to boycott

Sanguine: Confidently cheerful, or bloodthirsty

Scan: To peruse, or to glance

Seed: To sow seeds, or to shed or remove them

Trip: A journey, or a stumble

Variety: A particular type, or many types

Wind up: To end, or to start up

Do such words create mass chaos? No, we are generally able to pick up the meaning from context. If you say you are bound for London, I don’t think that you are trussed up. When they say on CSI that they are going to dust for fingerprints, I don’t think Grissom is going to bring out the duster. If I read that the Bank of England is responsible for oversight of the financial system I don’t think they job is to fail to oversee the banks. Well, actually in that case…

I agree with McWhorter that is actually quite cool that a word can literally mean both itself and its opposite. This is what makes studying a language so much fun.

One part of the book that I found fascinating was when he explained the process of grammaticalization. This is a process of semantic change by which nouns and verbs which represent objects and actions become grammatical markers such as affixes, prepositions and auxiliary verbs. In the latter category he provides us with plenty of examples. The modal verb can comes from the Old English cunnan, which meant know, an etymology which is reflected in such words as canny and cunning. What’s more, the past tense of cunnan was a word pronounced “coothe,” from which the couth in uncouth comes. The uncouth person lacks know-how, that is the knowledge of how to behave in polite society. Another typical modal ought’ originally meant ‘owed’. He also looks at affixes. The suffix ‘-ly’ is a contraction of ‘like’, a word which originally meant body. In the case of a word such as slowly, the original form would have been slow-like. And the past tense ending ed, it comes from the proto-Germanic did, as in walk-did.

There is much more in this book. He defends irregardless, stating that it is human nature to try to make sure that words are strong enough to do the job required. For instance, whelm used to mean what “overwhelm” means now. He also talks about


Monopoly: a brief history and what it tells us about being human

November 12, 2017

 

The Monopoly board game, which was created in 1935, is currently produced in 47 languages and sold in 114 countries. There is a world championship, which is held every four five years. The winningest countries are the United States and Italy with two wins apiece, although the former have not won since 1974. The winner takes home $20,580 – the total amount of play money that comes in each version of the game. I am not sure if this is an apocryphal story, but according to the Chicago Tribune, Fidel Castro was not a fan and banned the game, decreeing that every set be destroyed.

The traditional story behind the creation of the Monopoly was a feelgood one. Its inventor Charles Darrow had been unemployed during the Great Depression. The year was 1933. Desperate to support his family, the unemployed salesman went down his dark, damp basement, where he would toil away until he came up with the game. He developed the game using materials from his own home. The cards were handwritten and the board was covered with a piece of oilcloth.

It is a beautiful story. However, this story is leaving an important part out. It is the role of one woman. The woman in question was Lizzie Magie, a Washington resident, who in 1903 invented the Landlord’s Game. It was ironically intended to be a teaching tool that argued against the concentration of wealth and the injustices of capitalism. It was a “practical demonstration of the present system of land-grabbing with all its usual outcomes and consequences.” She was backing the theories of Henry George. This 19th century political economist and journalist saw landlords as parasites and proposed a “single tax” on them to replace all other taxes. The game was not, however, a great success. I guess this is the genius of capitalism. It took Magie’s anti-capitalist idea and turned it into billions of dollars of revenue.

There are numerous versions of monopoly. There have been more than 300 licensed versions of the Monopoly game developed themed with topics such as sports teams, pop groups and movies. There is now a fast version, wcich can be played in an hour, as opposed to the three or fours it usually takes.

The comedian Steven Wright once quipped that he thought that it was wrong that only one company made the game Monopoly. And Parker Brothers in the past, and Hasbro now have indeed aggressively defended its patents. Nevertheless, it has inspired alternative versions. One of my favourites is from Ralph Anspach a professor at San Francisco State University, who was living in Berkeley. His two young boys were playing Monopoly and Anspach didn’t like what he saw. He decided to create his own version – Anti-Monopoly. This led to a long-running legal battle with the official version. More radical was Bertell Ollman, who taught dialectical methodology and socialist theory at New York University. His game was called Class Struggle.

One of the most interesting things I learned while researching this post is a famous social science experiment carried out by social psychologist Paul Piff. He wanted to investigate how wealth changed people’s empathy towards different social classes. As part of his research, Piff ran a study using a rigged Monopoly game involving 100 pairs of strangers. The pairs played games in which the academics randomly picked one player who they would favour. The chosen player started out with more money, threw two dice instead of one, and was given twice as much cash on passing Go. Given all this help, they were bound to win. But what was interesting was how the winners reacted. They ate more of the pretzels that were on the table, became more aggressive and would openly mock their opponents. The put down their winning to their own play and the strategies they had employed. I don’t know how much these experiments shows. It does ring true, though. It speaks to our immense capacity for self-justification.

I have to confess that I’m not a big fan of Monopoly. I can’t remember the last time I played. Nevertheless, I do find the history fascinating.


Does money make you mean?

November 12, 2017

In this video Paul Piff talks about the Monopoly experiment and its wider implications.


My favourite authors #1: David Lodge

November 5, 2017

Literature is mostly about having sex and not much about having children. Life is the other way round. The British Museum Is Falling Down

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This is the first of an occasional series about my favourite authors. Whenever I am asked who they are, the name of David Lodge comes to mind. I have read seven of his novels, although it’s almost ten years since I read anything by him. The most recent one being Deaf Sentence, which came out in 2008. This is something I plan to remedy over the next few months

David Lodge was born in Dulwich, South London on 28 January 1935 to working-class Catholic parents. This background would inform his writing. His father William Frederick Lodge was a saxophonist and clarinettist in dance bands, while his mother, Rosalie Murphy Lodge, was a shorthand typist. He had an eventful childhood; he grew up in the days of the Blitz. Like many other children in this difficult time, he was evacuated to the countryside for the rest of the war. Once the conflict was over, the economic hardship continued with rationing lasting until July 1954. Luckily Lodge was able to benefit from the 1944 Butler Education Act. The working class boy attended St. Joseph’s Academy Catholic grammar school and in 1952 went on to read English at University College, London, which he graduated from with a Bachelor’s degree in English (with honours) in 1955. After doing his two years’ military service in the Royal Armoured Corps, he then earned a Ph.D. at the University of Birmingham, where he joined the English faculty in 1960. In this time he also married Mary Frances Jacob, with whom he had three children two sons and a daughter. One important experience was spending part of 1969 as a visiting professor at the University of California, Berkeley. He carved out a successful academic career until 1987 he took early retirement in 1987 to concentrate on his writing.

As well as being a novelist, Lodge is also an author of non-fiction specialising in literary criticism and theory. But it is his literary output that I’m going to focus on. He has published 15 novels. While none of his novels are overtly autobiographical, most of them are based on his personal experience. His early novels were marked by Lodge’s suburban upbringing in the austere conditions of post-war England. Religion is also important in the oeuvre of this self-described “agnostic Catholic”.

If you have never read any of his novels, the best place to start is his trilogy Changing Places, Small World and Nice Work. Set at the fictional Rummidge University, the novels place the spotlight on the world of academia in the age of post-modernism, jet-setting superstar academics, inter-departmental rivalries and how business began entering the universities in Thatcher’s Britain, all suffused with lots of sexual escapades. One unforgettable recurring character was Morris Zapp, the flamboyant American Professor said to be based on Stanley Fish who Wikipedia describes as literary theorist, legal scholar, author and public intellectual. In Small World slow-witted translator Akira Sakazaki who is translating English novelist Ronald Frobisher into Japanese, and who keeps sending him nonsensical questions about minor points in the novel. In Small World satirises the academic conference circuit:

That’s the attraction of the conference circuit: it’s a way of converting work into play, combining professionalism with tourism, and all at someone else’s expense. Write a paper and see the world! I’m Jane Austen – fly me!

Lodge is often associated with his friend, Malcolm Bradbury, because the two Birmingham University men combined academic and literary careers, and were both prominent figures in the popularisation of the campus novel. I am a sucker for this genre. Unfortunately, I have never read Bradbury’s The History Man, although I have seen the wonderful BBC adaptation.

Other works are also worth reading. How Far Can You Go? looks at the intersecting lives a group of English Catholics from their student years at University College London in the early 1950s up to the late 1970s. They have to deal with questions about sex, marriage and contraception. This is all in the backdrop of the changes in Catholicism following the Second Vatican Council as well as Humanae vitae, the 1968 papal encyclical against contraception. On the one hand it satirises Church attitudes to sex and the avoidance of pleasure. Yet, on the other hand, losing faith can be a disorienting experience for the protagonists:

“Our friends started life with too many beliefs — the penalty of a Catholic upbringing. They were weighted down with beliefs, useless answers to non-questions. To work their way back to the fundamental ones — what can we know? Why is there anything at all? Why not nothing? What may we hope? Why are we here? What is it all about? — They had to dismantle all that apparatus of superfluous belief and discard it piece by piece. But in matters of belief…it is nice question how far you can go in this process without throwing out something vital.

Paradise News, an exploration of paradise on earth and in heaven. The central character, Bernard, a laicised Catholic priest is taking his reluctant father Jack to Hawaii visit his aunt Ursula, who is dying of cancer. The novel deals with abuses in the past and Bernard’s gradual sexual awakening. It is also a wonderful satire of the modern travel industry. Travel is the new religion. Lodge’s character Roger Sheldrake deconstructs modern tourism:

The pool, as Roger Sheldrake knows from his researches, is not really designed for `swimming. It is small, and irregularly shaped, discouraging the swimming of orderly lengths; in fact it is impossible to swim more than a few strokes without bumping into the sides of the pool or into another bather. The pool is really designed for sitting or lying round, and ordering drinks at. Since the patrons are deterred for swimming for long, they get extremely hot and thirsty, and order a lot of drinks, which come with complimentary salted nuts designed to make them even thirstier and therefore order more drinks. But the pool, however minimal, is a sine qua non, the heart of the ritual. Most of the sunbathers take at least a perfunctory dip. It is not so much swimming as immersion. A kind of baptism

Finally Thinks features cognitive scientist Ralph Messenger and novelist Helen Reed, who arrives on campus as “writer-in-residence” to teach a creative writing class. It ultimately deals with science and art and their competing claims to the truth about life.

What I plan to do now is to catch up on the books that I haven’t read yet, especially his earlier works. I may also re-read some of his later novels. To be honest I’ve almost completely forgotten them and I had to look up the plots online. Nevertheless, I can strongly recommend you try this author.