Economics of geeks and hipsters

People want as much out of life as possible. One way of doing that is to maximize lifetime earnings. Another way is to maximize consumer surplus. When a marginal increase in earnings become too costly in time and energy, it is more efficient to start increasing consumer surplus. This leads to fragmentation of how people consume things. Hipsters and geeks are examples of this. The markets also respond by fragmentation.

Consumer surplus is the maximum price you would pay for a thing, minus what you actually paid for it. A person who likes standard milk chocolate, loves it even more than expensive chocolate, makes a killing in terms of consumer surplus, since milk chocolate is quite cheap. Appreciating second hand apparel could likewise make living in a first world country satisfying and affordable at the same time. Or old vinyl records. So that's an economic rationale for hipster culture. The advantage of consuming forgotten things (that are still commercially available) disappear when those things become retro, and price increases. A hipster who buys an overpriced item has in a sense failed (if the item was actually unappreciated, then it wouldn't be expensive). Then, that person is not a hipster but just someone who follows fashion. 

Now to geek culture. Being a geek is about doing one thing intensively at the expense of ignoring other things to the point that the it becomes problematic or embarrassing [1]. Sacrifice plays a part in geekiness. Hipsters don't want others infringing on their thing because it decreases consumer surplus, and geeks don't want it because it decreases the value of something that they have sacrificed for. When this happens, geeks either shrug and keep doing their thing (may be a sign of social illiteracy), or move into even geekier territory. This creates a market for even more specialized things. 

[1] Famous people who became famous through their own efforts are geeks who were lucky enough to be geeky about something that others became interested in later. Applies to arts, including science and development.  

Bottom-up and Top-down

The great insight in the theory of natural selection is that nature is bottom-up optimized rather than top-down optimized. 

A bottom-up optimizing system is characterized by local equilibrium equations. A top-down optimizing system is characterized by a global objective function. 

Top-down paradigms are popular among both scientists and mythologists. Here is an anecdote told by my astronomy professor. Why does Jupiter have so many moons? Top-down philosophers in the 1600s said that the reason is that the people on Jupiter are great scholars who like to read at night, and the many moons are there to provide them with plenty of reading light around the clock!

It takes a great effort to wean oneself from the impulse to apply top-down optimizing models to systems that are actually bottom-up. Genetic populations are bottom-up optimized. A genetic population stops evolving when there is no variation in the population that has a higher or lower relative fitness. This is not the same as the population having achieved perfection in any sense. Likewise, a variation that has a high relative fitness in the population, at the expense of decreasing the fitness of the species as a whole, can still prosper. 

Free markets are also bottom-up optimized. A market stops developing when there is no way to get an investment to create a company (or modify an existing one) that will produce the product with a margin that will yield a higher return on investment than the current interest rate. This is not the same as optimally converting given limited resources into the product. 

Now we get to looser ground. Something I've learned in my working life is that large organizations are also bottom-up optimized. A large organization stops changing when there are no changes that can be done within any manager's budget that will increase that manager's power. This is not the same as the company producing its product optimally. It's not entirely true that large corps are bottom-up. There can still be heroic figures who do things that help the company that get ignored, or worse. Small companies have a coordination boost relative to large companies because "stuff that increases an employee's status" and "stuff that is good for the company" are much easier to align in small companies than in large ones. 

So, can markets and large organizations be made to behave in a more top-down manner? Yes, if they are in the presence of a large source of energy. The word energy will have to do here, for lack of a better word.  For the market and the organization, the best example of an energy source is an unexploited innovation. In the presence of many great unexploited innovations, bottom-up systems can behave in a very harmonious and coordinated way. When the innovations run out, chaos, inefficiency, and stasis returns.

Something that should always be asked: what does the above model of reality predict and, more importantly, what does it prohibit? First of all, this should reduce our trust in institutions that were put in place during great ages of innovation. It's possible that they were always broken, but that their brokenness wasn't noticed because everyone was high on innovation-dope. 

The most important use of the bottom-up view is as a tool to analyse possibly broken organisations. When looking at an organisation we can ask "is this organisation behaving as if it had a single goal, or is it behaving as if it consisted of several semi-independent parts with possibly contradictory objectives?". The most apparent red flag is that one part of the organisation is working against another part. Another red flag is that one part is impeded by another part for a long period of time.

Philosophy test

 A single question test to determine whether someone has a philosophical mindset.

The question is: "Where would you like to go, if you could go anywhere?"

Failing answers include: Athens, Boston, Mars. Any specific location.

A person who likes thinking, and who plays around with ideas all the time, will recognise the question as being very underspecified. What is meant by "going"? Is it by conventional travel or through magic teleportation? Can any equipment be brought? Is the return trip included in the hypothetical offer? Can one stay for an unlimited time? 

Asking for clarification like this is necessary to make sure that the inquirer and respondent are both agreed on what is being asked. The asking of clarification questions is also an opportunity for the inquirer to be surprised: the respondent may have thought about something that the inquirer did not. A clarification process like this is such a valuable feature of dialogue, and it can be done in a few seconds.

A tip to feel more at home in a new neighborhood

Suppose you are walking in a neighborhood that you have moved to recently. You still feel like a stranger. A way to marginally overcome that feeling is to pick up a small piece of litter, and throw it in a wastebin. Preferably something that is not too icky, but say a dry ice cream paper. If you do this, you will feel a little bit of ownership of the place. 

This has worked for me several times. Other people are convinced as well.I recently took a walk in the neighborhood of my new office. I found a large piece of cardboard on the street. I tucked it in behind a wastebin so it wouldn't blow away, and kept walking. After about 20 meters, and old lady stopped me and asked about where to find a parking meter. "I'm afraid that I don't live here", I answered. "Really?", she said with surprise "it looked like you did".