Society

Yo-Yo Ma on Collaboration, Risk, and Life

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Yo-Yo Ma

Yo-Yo Ma is one of the best and most popular cellists in the world. With the brand new documentary The Music of Strangers out this month (from the same creators of the incredible 20 Feet From Stardom), Ma sat down with Harvard Business Review for an enlightening interview in the June 2016 issue. Here are some of his insights on:

  • Fruitful collaboration: “Two words: ego management. It’s easy to get locked into “in my world” or “this is the way I see it,” so you have to move your brain to a different time or structure. If you were nine years old and suddenly went to a new environment, yes, you would make comparisons, but your mind would still be in a somewhat spongelike state, as opposed to a judging one. It’s absorption versus critical thinking.”
  • Collaborators: “First I look for generosity; second, mutual respect and admiration. You might do something incredibly well, but if you’re a schmuck, if I don’t think we’d enjoy having dinner together, it’s not a complicated decision.”
  • Risk: “Bobby McFerrin, a one-man orchestra and improviser, once asked me, “What are you doing that’s interesting?” Inherent in that question is the assumption that you can do a lot that isn’t interesting. All great music is the result of successful invention…If you deliberately limit your experiences, your reporting will be limited.”
  • Practice: “[B]e tactilely engaged in engineering a solution, translating it to physical sound in physical space in the most efficient way, moving your fingers, arms, and body to elicit that which is in your head. That kind of practicing is deeply fulfilling. It’s not emergency practicing. It’s more like information becomes knowledge becomes love. The final achievement is to say, “I truly love this, and I have enough mastery to be able to share that love with someone else.””
  • Performance: “You have a responsibility, one, to know what the narrative is and make sure you’re telling the story and people are receiving it, and two, if anything impedes the narrative, to fix the problem.”
  • Avoiding burnout: “By retooling goals.” (I’ll let you read the entire paragraph is see how he has done this over the decades.)
  • Being a leader: “I just see myself as a human being trying to play my part. I am happy to share what I know and to work with people and be part of a movement in the arts and sciences, humanities, and technology that uses great thinking and invention to solve intractable social problems. But I don’t see myself as much of a leader. I don’t like to make pronouncements.”
  • Travel (life?) tips: “Don’t worry about the things you can’t control. When the inevitable delays happen, when something horrible goes on, just go into neutral and choose the high road. The other way never helps. Always go to the next time zone, and always carry on everything you need.”

And much more. Check out the full interview.

 

The Failure of Foreign Aid

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The Economist recently reported on the state of foreign aid:

Foreign aid can work wonders. It set South Korea and Taiwan on the path to riches, helped extinguish smallpox in the 1970s and has almost eliminated polio. Unfortunately, as Malawi shows, it is liable to be snaffled by crooks. Aid can also burden weak bureaucracies, distort markets, prop up dictators and help prolong civil wars. Taxpayers in rich countries dislike their cash being spent on Mercedes-Benzes. So donors strive to send the right sort of aid to the places where it will do the most good. How are they doing?

…By almost all of these measures, foreign aid is failing. It is as co-ordinated as a demolition derby. Much goes neither to poor people nor to well-run countries, and on some measures the targeting is getting worse. Donors try to reward decent regimes and punish bad ones, but their efforts are undermined by other countries and by their own impatience. It is extraordinary that so many clever, well-intentioned people have made such a mess.

Some economists (like NYU’s William Easterly) have been incredibly critical of foreign aid. Of course, not all aid is created equal, but there are better ways to help the poor abroad.

 

When Profits Are Sinister

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Profit is often a dirty word among certain political ideologies. However, for those who defend the importance of profits, it is necessary to realize that sometimes they are signs of something amiss. As economist James Bessen explains,

Profits are up. Operating margins for firms publicly listed in the US show a substantial and sustained rise. Corporate valuations are up as well. That is good news for managers and investors. But is it good news for society?

Economists such as Joseph Stiglitz and Luigi Zingales find the rise potentially troubling for two reasons. First, higher profits create greater economic inequality. Rising aggregate profits correspond to a decline in labor’s share of output, contributing to stagnant wages. Also, greater profits for some corporations but not others may create greater wage inequality.

Second, the rise in profits might represent a decline in competition and, with that, a decline in economic dynamism. While a dynamic, competitive economy rewards innovative firms with high profits and punishes poor performers with low profits, sustained aggregate profits suggest, instead, that firms are able to get away with higher prices because competition is limited. Firms engage in political “rent seeking”—lobbying for regulations that provide them sheltered markets—rather than competing on innovation. If so, then high profits portend diminished productivity growth.

However, the increase in profits could be due to firms “increasingly making profitable investments in new technology, in IT, or in their organizational capabilities.” Bessen’s new research paper gets to the bottom of it:

I find that investments in conventional capital assets like machinery and spending on R&D together account for a substantial part of the rise in valuations and profits, especially during the 1990s. However, since 2000, political activity and regulation account for a surprisingly large share of the increase.

This is how rent-seeking, pro-business (vs. pro-market) attitudes, and crony capitalism drag down our economy.

Check out the full article over at Harvard Business Review.

What Are the Effects of Premarital Sex on Marriage?

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According to sociologist Nicholas Wolfinger,

By the 2010s, only 5 percent of new brides were virgins. At the other end of the distribution, the number of future wives who had ten or more sex partners increased from 2 percent in the 1970s to 14 percent in the 2000s, and then to 18 percent in the 2010s. Overall, American women are far more likely to have had multiple premarital sex partners in recent years (unfortunately, the NSFG doesn’t have full data on men’s premarital sexual behavior, and in any event they recall their own marital histories less reliably than do women).

As premarital sex became more acceptable, it’s reasonable to anticipate that its negative effects on marital stability waned. In general, Americans became more accepting of nonmarital sex. Certainly fewer men entered marriage with the expectation of a virgin bride. All of the fanfare associated with hooking up is evidence that some young people have become comfortable with the idea of sex outside of serious relationships.

Be that as it may, this prediction is only partially borne out by the data shown in Figure 1. The following chart depicts the percentage of first marriages ending in divorce within five years of wedlock according to the decade the wedding took place and how many sex partners a woman had prior to marriage. Consistent with prior research, those with fewer sex partners were less likely to divorce.

Of course, the percentage drop after 2 partners raises even more questions in the complicated relationship between premarital sexual activity and marriage/divorce.[ref]Compare this with these previous findings.[/ref]

Check out the full article.

Storytelling and the Brain

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“Stories are told in the body,” says a recent article at the site for UC Berkeley’s Greater Good Science Center:

It doesn’t seem that way. We tend to think of stories as emerging from consciousness—from dreams or fantasies—and traveling through words or images to other minds. We see them outside of us, on paper or on screen, never under the skin.

But we do feel stories. We know in our gut when we’re hearing a good one—and science is starting to explain why.

Experiencing a story alters our neurochemical processes, and stories are a powerful force in shaping human behavior. In this way, stories are not just instruments of connection and entertainment but also of control.

The article continues to lead us down the path of how “stories unfold in our bodies,” from the release of oxytocin or dopamine to the increase of empathic skills to the triggering of “neurochemical processes that make certain kinds of resource-sharing possible.”

I’ve reported on the psychological benefits of fiction reading here before. This just goes to show how stories can change the brain.

Digital Globalization

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A couple months ago, I had a post on research by economist Andreas Bergh which highlighted the importance of information flows in battling poverty. A new McKinsey report on digital globalization supports this view:

To measure the economic impact of digital globalization, we built an econometric model based on the inflows and outflows of goods, services, finance, people, and data for 97 countries around the world. We found that over a decade, such flows have increased current global GDP by roughly 10 percent over what it would have been in a world without them. This added value reached $7.8 trillion in 2014 alone. Data flows directly accounted for $2.2 trillion, or nearly one-third, of this effect—more than foreign direct investment. In their indirect role enabling other types of cross-border exchanges, they added $2.8 trillion to the world economy. These combined effects of data flows on GDP exceeded the impact of global trade in goods. That’s a striking development: cross-border data flows were negligible just 15 years ago. Over the past decade, the used bandwidth that undergirds this swelling economic activity has grown 45-fold, and it is projected to increase by a factor of nine over the next five years[.]

Check out the full article to see how digital globalization is reshaping business.

It’s Not Easy Being [A] Green [Planet]

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As reported by NASA:

From a quarter to half of Earth’s vegetated lands has shown significant greening over the last 35 years largely due to rising levels of atmospheric carbon dioxide, according to a new study published in the journal Nature Climate Change on April 25.[ref]The greening effects of global warming were pointed out by Matt Ridley a couple years ago.[/ref]

An international team of 32 authors from 24 institutions in eight countries led the effort, which involved using satellite data from NASA’s Moderate Resolution Imaging Spectrometer and the National Oceanic and Atmospheric Administration’s Advanced Very High Resolution Radiometer instruments to help determine the leaf area index, or amount of leaf cover, over the planet’s vegetated regions. The greening represents an increase in leaves on plants and trees equivalent in area to two times the continental United States.

…However, carbon dioxide fertilization isn’t the only cause of increased plant growth—nitrogen, land cover change and climate change by way of global temperature, precipitation and sunlight changes all contribute to the greening effect. To determine the extent of carbon dioxide’s contribution, researchers ran the data for carbon dioxide and each of the other variables in isolation through several computer models that mimic the plant growth observed in the satellite data.

Results showed that carbon dioxide fertilization explains 70 percent of the greening effect, said co-author Ranga Myneni, a professor in the Department of Earth and Environment at Boston University. “The second most important driver is nitrogen, at 9 percent. So we see what an outsized role CO2 plays in this process.”

The surprising benefits of global warming.[ref]Of course, this doesn’t erase the drawbacks. The good news is that there is some recent evidence that current models may be overestimating warming.[/ref]

Have Wages Stagnated?

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The common claim that wages and living standards have stagnated in the U.S. has been disputed before, but The Washington Post recently reported on a new San Francisco Fed study that suggests the claim is based on a “statistical fluke”:

Workers continuously employed in full-time jobs received wage increases higher than inflation from 2002 to 2015. Last year, the gain was a 3.5 percent increase after inflation, up from 1.2 percent in 2010.

Typically, the median wage — the wage exactly in the middle of all wages — is cited as evidence of stagnation. Indeed, the Fed study confirms this. Median wage increases have fluctuated around 2 percent, unadjusted for inflation. But the median wage is misleading, the report argues, because it’s heavily driven by demographic changes: an influx of young and part-time workers whose relatively low wages drag down the median; and the retirement of baby-boom workers whose relatively higher pay no longer lifts up the median.

This should hopefully calm some of the public hyperventilation that has taken place over the supposed stagnation of wages.

The larger implication is that the study compromises the prevailing economic narrative, which emphasizes the stagnation of wages and living standards. Clearly, millions of households — especially the recently unemployed — have suffered large losses, and the gains of many others are underwhelming. But the impression that most people in the middle class are slipping backward seems overwrought. The anxiety about the future is real, but its causes must be more complicated than commonly thought.

How to Deal With the Top 1%: Competition

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“Curbing this inequality requires a clear understanding of its causes,” writes Brooking’s Jonathan Rothwell. “Three of the standard explanations—capital shares, skills, and technology—are myths. The real cause of elite inequality is the lack of open access and market competition in elite investment and labor markets. To bring the elite down to size, we need to make them compete.” He explains that–despite the claims of people like Robert Reich–corporate profits actually represented a lower share of GDP (4.9%) between 1980 and 2014 than between 1950 and 1979 (5.4%).

So, what’s going on here? The simple explanation is that wages and salaries are an inadequate measure of the share of economic benefits flowing to labor. Wages and salaries have declined as a share of total income, largely for two reasons. First, total national income includes government transfer payments, which are rising because of an aging population (e.g., Social Security and Medicare). Second, companies have greatly increased non-salary compensation (e.g., healthcare and retirement benefits). Total worker compensation plus transfer payments have actually slightly increased as a share of total national income, from 79 percent between 1951 and 1979, to 81 percent for the years from 1980 to 2015:

Rothwell 32516001

As for the claims that elite earnings are driven by advanced skills and IQ, Rothwell states, “It is certainly true that rising relative returns to education have driven up inequality. But as I have written earlier, this is true among the bottom 99 percent. There is no evidence to support the idea that the top 1 percent consists mostly of people of “exceptional talent.” In fact, there is quite a bit of evidence to the contrary.” Finally, while some entrepreneurs grow rich by founding an innovative technology, the rich are most often found in the doctor’s office. “No industry has more top earners than physicians’ offices, with 7.2 percent. Hospitals are home to 7 percent. Legal services and securities and financial investments industries account for another 7 and 6 percent, respectively. Real estate, dentistry, and banking provide a large number, too.”

So what is leading to inequality according to Rothwell?

One way that the top 1 percent cements their position is by occupying the financial sector, and accessing above-market returns on their investments…The accredited investor rule has mostly been ignored by scholars of inequality. But legal scholars Houman Shadab, Usha Rodrigues, and Cary Martin Shelby are an exception. They have each written persuasively about how the rules contribute to inequality by giving the richest investors privileged access to the best investment strategies. Shadab points out that other countries (with less inequality) allow retail investors to access hedge funds. The law has also inflated the compensation of hedge fund workers—roughly $500,000 on average—by restricting competition. Mutual funds—which charge tiny fees by comparison—are currently barred from using hedge fund strategies because they have non-rich investors. If the law was changed to allow mutual funds to offer hedge fund portfolios, hundreds of billions of dollars would be transferred annually from super-rich hedge fund managers and investment bankers to ordinary investors, and even low-income workers with retirement plans.

But that’s not all.

At the same time, we need more competition at the top end of the labor market. As economist Dean Baker points out, politicians and intellectuals often champion market competition—but what they mean by that is competition among low-paid service workers, production workers, or computer programmers who face competition from trade and immigration, while elite professionals sit behind a protectionist wall. Workers in occupations with no higher educational requirements see their wages held down by millions of other Americans denied a high-quality education and competing for relatively precious vacancies. For lawyers, doctors, and dentists— three of the most over-represented occupations in the top 1 percent—state-level lobbying from professional associations has blocked efforts to expand the supply of qualified workers who could do many of the “professional” job tasks for less pay.

Ultimately, Rothwell suggests that we increase the competition for the top 1 percent.

Before Marx, Adam Smith provided a framework for political economy that is especially useful today. Smith warned against local trade associations which were inevitably conspiring “against the public…to raise prices,” and “restraining the competition in some employments to a smaller number than would otherwise…occasion a very important inequality” between occupations. For earnings to be distributed more fairly, our goal is not to stand in the way of markets, but to make them work better.

Cultural Intelligence

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In the Spring 2016 issue of National Affairs, economist Arnold Kling has an engaging article on the concept of cultural intelligence:

Thanks to work in a number of related fields, collected in some exceptionally important books published in just the past few years, it is becoming increasingly apparent that progress tends to arise from the evolution of decentralized trial-and-error processes more than from grand schemes launched by planners and revolutionaries.

Economists and scholars of public policy are not the only ones conducting this research; students of human behavior are also finding support for Burke and Hayek’s theses — that the knowledge embedded in social norms and practices is vast compared to the knowledge of even the brightest, most educated individuals. As individuals, we cannot figure out very much by ourselves, but we learn a remarkable amount from others. In short, some social scientists in recent years have been building (or rebuilding) a powerful case for cultural intelligence.

One implication of their findings and arguments is that two sets of institutions in particular — markets and traditional social and familial practices — are the most important products of the process of social evolution building on cultural intelligence because they are the foremost means by which that process operates in free societies. It should hardly surprise us, therefore, that these two sets of institutions are also the foremost targets and objects of scorn of today’s progressive planners.

Drawing on the work of cultural psychologists and anthropologists like Joseph Henrich, Kling argues against the the heavily centralized, top-down worldview of the “engineers” and instead embraces the bottom-up adaptability of the “ecologists.” One school of thought centralizes power and decision-making into the hands (minds?) of a few intelligent elites, while the other recognizes that the collective brain matters more than individual ones in terms of knowledge. “Henrich,” Kling writes,

even goes so far as to argue that, as isolated individuals, humans are not particularly intelligent in comparison with chimpanzees. It is not the hardware of our brains that makes us superior. It is instead the software that is loaded into our brains by cultural learning. In fact, Henrich’s central thesis, in terms of this metaphor, is that the hardware of human brains evolved to be able to run the software of cultural learning, and that we are the only species that evolved in this manner. To use a different computer metaphor, we are not born with much in the way of individual intelligence and knowledge. Instead, we download cultural information from the “cloud”: our family and friends, teachers and mentors, books, electronic media, markets, and other cultural institutions.

…This…is highly reminiscent of Friedrich Hayek’s views about how markets work. Markets coordinate across many people the tacit knowledge that resides with individuals. In contrast, the would-be economic planner, who makes decisions by “applying causal models, rational thinking, or cost-benefit analyses,” works with an information set that is woefully inadequate to the task.

The whole thing is worth reading.