Oct. 16th, 2013

pktechgirlbackup: (pktechgirl)
A while ago I read Farewell To Alms, whose basic thesis was that Europe industrialized before Asia because Europe had worse hygiene. More specifically, Europe had both a higher birth rate and a higher death rate (in part because their atrocious sanitary conditions encouraged disease), and that led to more selection pressure, making Europeans smarter and more industrious than Asians. At the time I thought the book had some serious holes but also some interesting ideas. After reading more history, I increasingly want to withdrawal what praise I gave it. If disease led to economic prosperity, Africa would look like Dubai.

Learning history in school, I vaguely knew that at one point China had been pretty advanced, but then regressed somehow. And it's true, they did suppress a few technologies, like gun powder. But China was the world's superpower for much longer than I appreciated- probably right up until the industrial revolution. Europe went off to other lands in search of precious medals because China would give them spices for them*. And a lot of the civilizations they conquered were pretty advanced themselves, but were crippled by European diseases (so I guess the poor hygiene thing did work out for them after all).

The industrial revolution happened in England because coal was cheap and labor was expensive (why the difference in the cost of labor? I don't know, but I'll bet it's interesting). But more generally: the rules of the game had changed, and the winners under the old rules are never the winners under the new rules. It's true of people, it's true of companies, and it's true of countries. That is because a lot of what looks like genius is actually happening to have your gifts be the right thing for the moment, and happening to bet on the right horse **. Not that success is randomly attaching itself regardless of your skills, but that different skills have radically different values in different contexts. Big tech companies are obsessed with acting like start ups because start ups have the most growth, but that's because we're only looking at the successful ones. Thinking you can predict the next big thing is like thinking you can predict lottery numbers by studying the characteristics of the winners.

America was the winner under the last system. It was never going to be the winner under the next system. I don't know if the system has changed yet, but it seems highly plausible. So many of America's advantages are due to inertia, or network effects, or the tallest pygmy effect, rather than things we do right now. If we lose those, they are not coming back, even if we fix everything.

Breaching the debt ceiling may very well be the thing that catalyzes that loss. And then things will get much, much tougher for us. I'm consoling myself with the idea that this was going to happen eventually, and postponing the inevitable will only make it worse. The best case scenario is we pull at IBM/England, and that involves a much more intimate relationship with reality than the country has had recently.

*source: Debt: the first 5000 years.

**Queen of Versailles is a documentary about a family that made billions of dollars on time share properties, who are spending a small portion of the proceeds on the biggest/most expensive house ever. The business was built on the worst of the pre-crisis banking practices, and is decimated when the banks curtailed that. There were good businesses that went under because the credit markets froze or demand temporarily dropped, but this is not one of those: this corporation's very existence depended on toxic banking. The money dries up, and you watch them make stupider and stupider choices- to keep going with the $100 million house, to refuse to downsize or sell the business. I couldn't get over how someone smart enough to make that much could money be that dumb. The answer is probably that he would have had the same money making model whenever he went into business, and it just happened to be the right model for the moment.

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