Quotulatiousness

October 30, 2024

Zuckerberg’s bad bet on Virtual Reality

Filed under: Business, Media, Technology — Tags: , , — Nicholas @ 03:00

Ted Gioia notes the anniversary of Mark Zuckerberg’s worst financial decision — the plunge into virtual reality:

A big birthday happens tomorrow. But don’t expect a celebration.

There will be no party, no disco. There will be no cake, no clown, no bouncy house for the kids. No Marilyn Monroe cooing the birthday song.

Just dead silence. But make no mistake — this is a very expensive birthday.

Exactly three years ago, Mark Zuckerberg placed a huge bet on virtual reality. On October 28, 2021, he even changed the name of his company — from Facebook to Meta.

A new company was born. But that’s now a huge embarrassment.

The name Meta is a lasting reminder of the most foolish decision Zuck ever made — even worse than Facemash or those ugly T-shirts.

Of course, that’s not how he saw things three years ago.

“Meta’s focus will be to bring the metaverse to life,” the company announced. “In the metaverse,” Zuckerberg bragged, “you’ll be able to do almost anything you can imagine.”

There was a catch — the tech billionaire needed to convince millions of people to wear virtual reality headsets.

But they looked ridiculous — you literally had to wear blinders if you wanted to enter Mr. Zucker’s neighborhood.

The very next day, I declared that “Meta is for losers”.

“This will never be cool.”

Zuckerberg was “making the wrong bet”, I warned — and gave my reasons:

    The interface looks goofy and cartoonish. Instead of entering the gritty, exciting world of Blade Runner, you’re trapped inside a bad episode of Family Guy …

    And users will look creepy too. You need to lock yourself into a headset to get the full benefit of the metaverse — and there’s no way that Zuckerberg can make that look cool. The people who spend hour after hour in his metaverse will be the subject of jokes and mockery …

    They will be nerds and incels and the most disgruntled members of society, each desperate for escape.

Mark Zuckerberg eventually figured this out. But the company lost more than $20 billion over the next two years in a desperate attempt to convince normal people to abandon reality and enter his fake world.

Even as consumers resisted, Meta refused to admit it had made such a colossal mistake. Just last year, Zuckerberg still denied that he was abandoning virtual reality.

“A narrative has developed that we’re somehow moving away from focusing on the metaverse,” he told shareholders. “So I just want to say upfront that that’s not accurate.”

Then he did exactly that — retreating from the metaverse he had spent so much money building.

Fortune warned three months ago that Mr. Z’s metaverse “may finally be running out of cash”. Then in August, Meta cancelled the development of a next generation VR headset.

October 12, 2024

Canadians don’t hate their banks enough

Filed under: Business, Cancon, Economics, Government — Tags: , , , — Nicholas @ 04:00

In the latest SHuSH newsletter, Ken Whyte follows up on an earlier item thanks to the many Canadians who responded with their own tales of woe in their dealings with Canadian banks:

Since I mentioned a couple of weeks ago that we have published Andrew Spence’s Fleeced: Canadians Versus Their Banks, the latest edition of Sutherland Quarterly, I’ve been inundated with people’s horror stories of their dealings with Canada’s chartered banks. Jack David’s tale in the above interview is a classic of the genre.

In Fleeced, Andrew lays out in aggravating detail how Canadian banks, although chartered by the federal government to facilitate economic activity in the broader economy, do all they can to avoid lending to small and medium businesses, never mind that small and medium businesses employ two-thirds of our private-sector labour force and account for half of Canada’s gross domestic product.

By OECD standards, small businesses in Canada are starved of bank credit, and when they are able to secure a loan, they pay through the nose. The spread between interest rates on loans to small businesses and large businesses in Canada is a whopping 2.48 percent, compared to .42 percent in the US — more than five times higher.

Why? Because Canada’s banks are a tight little oligopoly, impervious to meaningful competition. Their cozy situation allows them to be exceedingly greedy. Their profits and returns to shareholders are wildly beyond those of banks in the US and UK (and, as Andrew demonstrates, their returns from their Canadian operations are far in excess of those from the US market, meaning they screw the home market hardest.)

Our banks never miss an opportunity to impose a new fee, or off-load risk. From their perspective, small business involves too much risk — some of them will inevitably fail. The banks prefer that publishers and dry-cleaners and restaurateurs either finance themselves by pledging their homes, or use their credit cards to cover fluctuations in cash flow or make investments that will help them hire, expand, and grow. And that’s what entrepreneurs do. According to a survey by the Canadian Federation of Independent Business, only one in five respondents accessed a bank loan or line of credit. Half of respondents financed themselves, tapped existing equity and personal lines of credit, and about 30 percent used their high-interest credit cards.

By severely rationing credit and making it exceedingly expensive, Canada’s banks siphon off an ungodly share of entrepreneurial profit to themselves while leaving the entrepreneur with all the risk. Their insistence on putting their own profits above service to the Canadian economy is one of the main reasons Canada has such a slow-growing, unproductive economy and a stagnant standard of living.

There is much else in this slim volume to make your blood boil: exorbitant fees on chequing and savings accounts; mutual fund expenses that torpedo investments; ridiculous mortgage restrictions, infuriating customer service …

Fleeced: Canadians Versus Their Banks is a stunning exposé of the inner workings of our six major banks — something only a reformed banker and financial services veteran such as Andrew could write. He also explodes the myth that a bloated, uncompetitive banking sector is the price we have to pay for stability in times of financial crisis.

We are in desperate need of banking reform in Canada. Read this book and you’ll be shouting at your member of Parliament for prompt action.

September 29, 2024

The “Foundations” essay could apply equally to Canada’s doldrums as it does to Britain

Filed under: Britain, Bureaucracy, Cancon, Economics — Tags: , , , , , — Nicholas @ 04:00

Earlier this week, I linked to the “Foundations” essay by Ben Southwood, Samuel Hughes, and Sam Bowman and it struck me that so much of what they discuss about Britain’s stagnation applied at least as well to Canada. In the National Post, John Ivison concurs:

The “Foundations” essay pointed to moribund GDP per capita growth, among other data points, to make the argument that Britain is standing still economically. (Britain’s economy grew 0.7 per cent a year between 2002 and 2022, Canada’s increased 0.6 per cent a year in the same period, while U.S. output swelled 1.16 per cent a year.)

In relative terms, both countries are getting poorer: in 2002, Canada’s GDP per person was 81 per cent of the U.S.; in 2022, it was 72 per cent. The same figures for the U.K. against the U.S. are 78 per cent in 2002 and, 70 per cent in 2022.

The reason for Britain’s stagnation, the authors argue, is that it has effectively banned investment in transportation, energy and housing — “the foundations it needs to grow.”

Sound familiar?

“The most important economic fact about modern Britain is that it is difficult to build almost anything, anywhere. This prevents investment, increases energy costs and makes it harder for productive economic clusters to expand,” the authors write, saying the result is lower productivity, incomes and tax revenues.

They argued that Britain needs a program of reform with the scale and ambition of the liberalization of the 1980s that focused on cutting taxes, curbing union power and privatizing state-run industries.

“This time we must focus on making it easier to invest in homes, labs, railways, roads, bridges, interconnectors and nuclear reactors,” they write.

That’s a difficult proposition for politicians who are able to resist anything except the temptation to use resources for immediate electoral gratification, rather than investing for a time after they have left office.

Both Canada and Britain are laggards when it comes to investment in infrastructure. While China spent more than five per cent of its GDP on roads, bridges and other infrastructure in 2021, Canada invested just 0.5 per cent (down from 1.3 per cent in 2010) and the U.K. 0.9 per cent.

But the lack of dynamism is not simply political expediency. Rather, it is motivated by an indifference, even a hostility, toward building critical infrastructure.

The Foundations report noted that Britain has not built a reservoir for 30 years, yet faces chronic water shortages in the east of England. Its environmental agency has blocked new development on the basis that it could only be supplied with water by draining environmentally valuable chalk streams. The result is that England’s innovation hub, Cambridge, is barred from expanding, which threatens to strangle the country’s life-sciences industry.

Similar impulses are at work in Canada. Federal Environment Minister Steven Guilbeault said in February that Ottawa would stop investing in new road infrastructure — a position he later clarified to say meant the federal government would not fund large projects like a highway tunnel connecting Quebec City and Levis, Que.

That same sentiment is reflected in the federal Liberal government’s Impact Assessment Act, passed in 2019, which slowed the pace and increased the cost of major project approvals.

On the housing front, a generation of activists emerged who were intent on preventing urban sprawl yet were also opposed to building mid-rise buildings of the kind that eased housing pressures in continental Europe. Constraints on approval are a major contributor to the 3.5-million-unit housing gap because supply has not kept pace with demand.

The consequence of Canada’s regulatory sclerosis is what business veteran Paul Deegan and former clerk of the Privy Council Kevin Lynch in an FP Comment article earlier this year referred to as “an insidious stealth tax on Canadian jobs and growth“.

Taking each of the “foundations” in turn, the depth of the problem becomes clearer — but so do the solutions.

September 24, 2024

British stagnation – “at some point it becomes impossible to grow when investment is banned”

Filed under: Britain, Bureaucracy, Economics, France — Tags: , , , , , — Nicholas @ 04:00

Ed West reviews a new essay by Ben Southwood, Samuel Hughes, and Sam Bowman which tries to identify the underlying reasons for British economic stagnation:

The theme running through the essay is that the British system makes it very hard to invest and extremely expensive and legally difficult to build, making housing and energy costs prohibitive.

While we all know we have fallen in status, “most popular explanations for this are misguided. The Labour manifesto blamed slow British growth on a lack of “strategy” from the Government, by which it means not enough targeted investment winner picking, and too much inequality. Some economists say that the UK’s economic model of private capital ownership is flawed, and that limits on state capital expenditure are the fundamental problem. They also point to more state spending as the solution, but ignore that this investment would face the same barriers and high costs that existing infrastructure projects face, and that deters private investment.”

The problem is that “all of these explanations take the biggest obstacles to growth for granted: at some point it becomes impossible to grow when investment is banned”.

Even before the Russian invasion of Ukraine, the industrial price of energy had tripled in under 20 years. Per capita electricity generation in Britain is only two-thirds that of France, and a third of the US, making us closer to developing countries like Brazil and South Africa than other G7 states. Transport projects are absurdly expensive, mired by planning rules, and all of this helps explain why annual real wages for the median full-time worker are 6.9 per cent lower than in 2008.

In one of the most notorious examples, the authors note that “the planning documentation for the Lower Thames Crossing, a proposed tunnel under the Thames connecting Kent and Essex, runs to 360,000 pages, and the application process alone has cost £297 million. That is more than twice as much as it cost in Norway to actually build the longest road tunnel in the world.”

Britain’s political elites have failed, they argue, because they do not understand the problems, so “they tinker ineffectually, mesmerised by the uncomprehended disaster rising up before them”.

Even “before the pandemic, Americans were 34 percent richer than us in terms of GDP per capita adjusted for purchasing power, and 17 percent more productive per hour … The gap has only widened since then: productivity growth between 2019 and 2023 was 7.6 percent in the United States, and 1.5 percent in Britain … the French and Germans are 15 percent and 18 percent more productive than us respectively.” The gap continues to widen, and on current trends, Poland will be richer than the United Kingdom by the end of the decade.

Britain began to fall behind after the War, but after decades of relative stagnation, its GDP per capita had converged with the US, Germany and France in the 1980s, and our relative wealth peaked in the early Blair years. (Personally, I wonder if one reason for the great Oasis nostalgia is simply that we were rich back then.) If Britain had continued growing in line with its 1979-2008 trends, average income today would be £41,800 instead of £33,500 — a huge difference.

France is the most natural comparison point to Britain, a country “notoriously heavily regulated and dominated by labour unions”. This is sometimes comical to British sensibilities, so that “French workers have been known to strike by kidnapping their chief executives – a practice that the public there reportedly supports – and strikes are so common that French unions have designed special barbecues that fit in tram tracks so they can grill sausages while they march.” Only in France.

It is also heavily taxed, especially in the realm of employment, and yet despite this, French workers are significantly more productive. The reason is that France “does a good job building the things that Britain blocks: housing, infrastructure and energy supply”.

With a slightly smaller population, France has 37 million homes compared to our 30 million. “Those homes are newer, and are more concentrated in the places people want to live: its prosperous cities and holiday regions. The overall geographic extent of Paris’s metropolitan area roughly tripled between 1945 and today, whereas London’s has grown only a few percent.” One quality-of-life indicator is that “800,000 British families have second homes compared to 3.4 million French families“.

They also do transport far better, with 29 tram networks compared to seven in Britain, and six underground metro systems against our three. “Since 1980, France has opened 1,740 miles of high speed rail, compared to just 67 miles in Britain. France has nearly 12,000 kilometres of motorways versus around 4,000 kilometres here … In the last 25 years alone, the French built more miles of motorway than the entire UK motorway network. They are even allowed to drive around 10 miles per hour faster on them.”

August 5, 2024

Short-term technological forecast – “If I were a commercial pilot, I’d tell you to return to your seats and buckle up”

Filed under: Media, Technology, USA — Tags: , , , , , , , — Nicholas @ 04:00

Most of this Ted Gioia post is behind the paywall (and if you can afford it, I’m sure you’d get your money’s worth for a subscription):

I anticipate extreme turbulence on every front for the remaining five months in 2024. You will see it in politics, business, economics, culture, world affairs, the stock market, and maybe even your own neighborhood.

That’s one of the themes of my latest arts and culture update below.

What happened to the AI business model last week?

After almost two years of hype, the media changed its opinion on AI last week.

The hype disappeared almost overnight

All of a sudden, news articles about AI went sour like reheated 7-Eleven coffee. The next generation AI chips are delayed, and 70% of companies are behind in their AI plans. There are good reasons for this — most workers now say AI makes them less productive.

People are also noticing that AI businesses want to use the entire electricity grid to run their money-losing bots. Meanwhile AI companies are burning through cash at historic levels. Even under the best case scenario, this all feels unsustainable.

But the worst disclosure, in my opinion, came on July 24 — just eleven days ago.

A study published in Nature showed that when AI inputs are used to train AI, the results collapse into gibberish.

This is a huge issue. AI garbage is now everywhere in the culture, and most of it undisclosed. So there’s no way that AI companies can remove it from future training inputs.

They are caught in the doom loop I described last week.

That same day, the Chief Investment Officer at Morgan Stanley warned investors that AI “hasn’t really driven revenues and earnings anywhere”. One day later, Goldman Sachs quietly released a report admitting that the AI business model was in serious trouble.

Even consulting firms, who make a bundle hyping this tech, are backtracking. Bain recently shared the following chart (hidden away at the end of a report) which explains why AI projects have failed.

These findings are revealing. They show that management is absolutely committed to AI, but the tools just don’t deliver.

And, finally, last week the media noticed all this.

They published dozens of panic-stricken articles. Investors got spooked too — shifting from greed to fear in a New York minute. Over the course of just two days, Nvidia’s stock lost around $400 billion in market capitalization.

In this environment, true believers quickly turn into skeptics. The whole AI business model gets scrutinized — and if it doesn’t hold up, investment cash flow dries up very quickly.

This is exactly what I predicted 6 months ago. Or even a year ago.

I expect that the next few weeks — or maybe even the next few days — will be extremely turbulent in the AI world.

Buckle up!

The dominant AI music company just admitted that it trained its bot on “essentially all music files on the Internet”.

Suno is a huge player in AI music — it tells investors it will generate $120 billion per year. Microsoft is already using its technology.

But there’s a tiny catch.

The company now admits in a court filing:

    Suno’s training data includes essentially all music files of reasonable quality that are accessible on the open internet, abiding by paywalls, password protections, and the like, combined with similarly available text descriptions

Hey, this is totally illegal — it’s like Napster all over again.

Suno will need to prove that all these copyrighted songs are “fair use” in AI training. I doubt that any court will take that claim seriously.

If the music industry is smart, they will use this violation to shut down AI regurgitation of copyrighted songs.

If the music industry is stupid — run according to my “idiot nephew theory” — they will drop charges in exchange for some quick cash.

June 29, 2024

“So, as the pundits say, everywhere is warming faster than everywhere else”

Filed under: Cancon, Environment, Government, Law, Liberty, Politics — Tags: , , , , , — Nicholas @ 03:00

Terry Etam on the totalitarian controls being imposed on citizens in Canada where under yet another censorship bill being pushed out to ensure that nobody says anything that contravenes some yet-to-be-determined “internationally recognized methodology”:

And then, as a final but impressive gasp of inept state control, witness Canada’s frantic flailing to control the situation by …

Send in the goons: Canada cracks down on any speech it doesn’t like, with sweeping rules measured against undefined regulations, and enters the historical pantheon of legendarily badly run states

We’ve all heard about bill C-59 by now, the government of Canada’s crackdown on any comments related to emissions reduction mitigation efforts that do not adhere to “internationally recognized methodology”. It’s a Soviet-style attempt to crack down on any talk about what companies are doing to reduce emissions, or anything they do that is an attempt to reduce “the environmental, social and ecological causes or effects of climate change”.

The apes in charge, and their sycophants, say hey, it’s not censorship at all, you can talk about emissions reduction all day long, so long as it meets some undefined international standard, and the onus of proof is on anyone making the statement to show that they are not violating some “internationally recognized methodology” that does not exist.

This whole fiasco is of course a one way street; the freedom to say anything that cements the climate emergency narrative remains gloriously unchecked. For example, energy commentator David Blackmon recently catalogued on LinkedIn the number of countries/regions that claim to be warming faster than the global average: Canada, Mexico, Latin America and Caribbean, Arctic, Asia, Africa, the US, Europe, Russia, Australia, China, and Finland all claim to be warming faster than the global average. The high priest of modern politicized science, Scientific American, says that oceans are also warming 40 percent faster than expected, and that oceans absorb up to 90 percent of the warming caused by human carbon emissions, and SA also notes that the South Pole is warming “three times faster than the global average”. So, as the pundits say, everywhere is warming faster than everywhere else.

Extrapolating from this, in keeping with necessary mathematical precedents such as how averages work, then the few remaining regions not mentioned must be plummeting in temperature, because that’s how averages work. And I mean plummeting, if it alone is offsetting the above-average gains in the rest of the world. Strange indeed how not a single headline can be found to that effect.

The speech police have no problem with such math crimes, because the asinine claims are put forth under the banner of “science”. It must be concluded then that math is not one of the “internationally recognized methodologies”.

No matter. The point is, as always, to silence discussions and ram through whatever ideological junk they can while still clinging to power like a bee holding onto an accelerating windshield.

Welcome to Canada, where if global embarrassment were an Olympic sport we’d be wearing perma-gold. Joke’s on us though; we elected these people. We should now clearly understand why Canada’s status as an investment haven is plummeting like a shot duck. (Do not point me towards legendary genius Warren Buffett who says he is comfortable investing in Canada; Buffett buys existing businesses, with moats, and the government of Canada is working to build those moats as fast as it can. Remember this investing rule for the foreseeable future: existing infrastructure is getting more valuable, because building anything gets harder by the day.)

It is probably unfair to single out Canada for such withering criticism when other western countries are on similar energy suicide missions. Australia, England, Germany … all under the spell of radicals that will accept nothing other than total nihilistic energy “victory”, a crown that seems to mean de-industrialization and subjugation of citizens in autos they don’t want, doing things they don’t want to, and not being permitted to say what they want to. (New Zealand was in that club as well, but has recently repealed a ban on oil & gas exploration when it dawned on them that fields decline, and do not produce at flat levels in perpetuity without investment. Yes, western governments really have enacted such legislation while simultaneously holding an astonishing ignorance about how energy really works.)

As far as Canada’s hydrocarbon sector goes, the most important thing to do at this stage is to keep our heads [down] and carry on providing the energy the world desperately needs. And that means every single person, right down to Guilbeault’s Greenpeace and the soup throwing fools of Just Stop Oil. If the feds are going to outlaw emissions talk, let them … the rotten foundations of their world can’t stand for much longer.

No one should stand taller than one that provides reliable and affordable energy for the globe’s citizens. Go back to work, and patiently wait until the inevitable happens, the day when governments are no longer able to pretend they can’t see reality. It’s going to be epic.

June 12, 2024

QotD: Wall Street

Filed under: Business, Humour, Quotations, USA — Tags: , — Nicholas @ 01:00

Wall Street is a street with a river at one end and a graveyard at the other. This is striking, but incomplete. It omits the kindergarten in the middle.

Fred Schwed Jr., Where Are the Customers’ Yachts?, 1940.

May 8, 2024

The cocoa shortage is really the same economic trend that caused the Victorian “servant problem”

Filed under: Economics, Europe, Food — Tags: , , , , , — Nicholas @ 05:00

Tim Worstall explains not only why your favourite chocolate bar is going to be more expensive, but also why your olive oil will do the same and why it really is the same thing as the Victorian and Edwardian upper class complaints about “the help”:

Upper classes expected maids and other servants to be cheap, eager, and easy to replace. This began to change quickly in the Victorian era, as women found better-paying jobs in commerce and industry that didn’t require bowing and scraping and putting up with constand, casual abuse from oblivious wealthy snobs.

As you might have noticed, cocoa is getting very much more expensive. Futures prices (no, futures are not a good guide to actual market prices but still) have gone from $3,000 a tonne or so (-ish, you understand ) to $12,000 and back to $8,000 or so. According to the usual suspects this is climate change. According to those a little more informed there’s El Nino, there have been a few rusts and plant plagues to deal with. Low prices led to not much planting in recent years — all sorts of little problems that led to that burst of higher prices.

Real prices have changed, the sort of Cadbury’s bar that my wife likes a piece of with her afternoon coffee has gone up by a € a bar in recent weeks (I know, I know, “Send Munnies! Quick!”) and so something must be done.

But there’s a much larger and more significant problem here and one to which there may or may not be a solution. The servant problem.

One of those things you learn when living in foreign is that the poorer a country is the easier it is to get a servant and the cheaper a servant is when you get one. This doesn’t wholly make sense to folk until it’s explained. A poor place is one where wages are low — where wages are low is a poor place. They’re the same statement. So, wages for a servant are low in poor countries.

We can up that a little as well. Poor people spend — truly poor people that is — some 80% of their income on food and shelter. So, when you’re in one of those truly poor places you can gain access to a servant — their fulltime, undivided services — for $2 a day plus a bowl of boiled rice and being allowed to sleep in the barn. Because, if they were out there in the cash economy they’d be paid $2 a day (800 million still live at that level out there) and they’d have to buy their own bowl of rice and a tarpaulin to shelter under out of that.

Servants are cheap in poor places because human labour is cheap in poor places because a place with cheap labour is a poor place. QED.

As places become richer human labour costs more. Which is why the letters pages of The Lady started to fill up with complaints about the uppityness and demands of servants from about the 1880s onwards — about the time that British wages at that low and untrained end first started to substantially rise above mere subsistence. This is also one of our major political problems now that middle class women have the vote. They’re using the franchise to insist that government do something about that servant problem. That’s what all that insistence upon child care subsidies and freebies is about. Those middle class women going off to their terribly important power skirt jobs can no longer afford to hire some working class popsie to look after their kids — so government must be forced to do so instead. The correct answer being look after your own damn kids, obviously.

But cheap labour in poor places:

    Britain is at risk of olive oil shortages as the industry is wracked by a production crisis.

    Fears are growing over the risk of empty shelves as growers across Europe battle a combination of extreme weather, inflation and high interest rates.

Interest rates matter because you plant, wait some number of years, only then do you gain olives. You will then gain them for many decades even centuries, but that wait without income is more painful the higher interest rates get.

There are rusts, plant plagues, afflicting the crop across much of Europe. Of course we’ve those blaming everything on climate change but that’s just the usual bollocks.

However, low wages in poor places. I live in the middle of an oil producing area. Vast waving acres of olive trees in fact. I’ve also lived, until recently, in an historically poorer area of the same country. Where much of the land — little 2 and 4 acre farms (if they were lucky) which might raise a few goats, a sheep (cheese more than anything) and have a couple or four olive trees — has been simply abandoned. The place is getting richer, no one wants to scrape a living on 4 acres of land these days. Rightly so. 4 acres is an adventurous garden, not a living. The absence of those goats is also why the wildfires are getting so much worse — there’s more scrub to burn.

I can take you to places where there are hundreds of acres of such land. Plenty of olive trees in there too, all fruiting and none of them being picked. Because picking olives from the occasional tree is hard bloody work. Spread a net beneath it, hit the tree hard, a lot. Collect up the net with all the olives. Then sort them. By hand. Each single one needs to be checked (for worms and rot) and then nicked. Then you can take them down to the oil mill (every village has at least one) and you hand over the olives and get back the oil, minus a percentage for the mill owner.

April 23, 2024

Debating the economic impact of the Raj on India

Filed under: Books, Britain, Economics, History, India — Tags: , , , , , — Nicholas @ 05:00

At The Daily Sceptic, Nigel Biggar looks at a few books making or refuting the narrative on how much or how little British rule in India extracted or contributed to the economic life of the subcontinent:

Beyond slave-trading and slavery, what were the economic effects of British imperial dominance? Can they be reduced to Britain’s leeching wealth from exploited subject peoples?

For over a century, that is what Indian nationalists have claimed. It is also what the politician Shashi Tharoor claims in his 2016 book, Inglorious Empire: What the British Did to India. Against him, however, the Bengali-born, LSE-based economic historian Tirthankar Roy has declared of the nationalist critique that “generations of historians … have shown that it is not [true]”. Pace Tharoor, the statistic that India produced 25 per cent of world output in 1800 and 2–4 per cent in 1900 does not prove that India was once rich and became poor: “[i]t only tells that industrial productivity in the West increased four to six times during this period … The proposition that the Empire was at bottom a mechanism of surplus appropriation and transfer has not fared well in global history”.

On the contrary, the British Empire’s commitment to free trade gave Indian entrepreneurs new opportunities to grow. Some of them visited England in the late 19th Century, observed the workings of manufacturing industry, imported machinery and expertise to India, built factories employing Indians, and then outcompeted Manchester. This is exactly how the Tata Iron and Steel Company began in Bombay – the same company that now owns what remains of the British steel industry.

What is more, colonial governments often protected native producers against British business, in order to moderate economic and social disruption, partly because they genuinely cared for the welfare of native people and partly because they didn’t want to have to manage the political unrest that foreign commercial intrusion could excite. Famously, in 1910-11 colonial officials barred Lever Brothers from acquiring concessions in Nigeria on which to establish palm-oil processing mills with widespread hinterlands, since Africans were already producing for the world markets and generating tax revenue and because the alienation of large areas of land risked provoking native opposition.

Further still, the British were the leading exporters of capital from the mid-19th Century to at least 1929. Between 1876 and 1914, Britain invested over a third of its overseas capital in the Empire, over 19% of it in India. Of course, British investors often made a profit out of this. That’s the thing about investment: you tend to want to grow your money, not waste it. But if the British gained, so did colonial peoples. Take railways. By 1947, British India had 45,000 miles of railway track, most of it constructed with private capital, whereas five years later un-colonised China still had less than 18,000 miles. For sure, the railways served military purposes. But they also served commercial and economic ones: one estimate reckons that when the railway network reached the average district, real agricultural income rose by about 16%. And it served the welfare purpose of efficient famine relief, too.

A basic reason why the British sent their capital overseas to the Empire, enabling the growth of businesses and the building of infrastructure, was that colonial states provided sufficient political stability and legal certainty to make the risks of financial ventures worth taking. (Badenoch hints at this in her reference to the economic effects of the Glorious Revolution of 1688.) That explains why Australia’s economic growth compares so favourably with that of many Latin American countries, and why, between the 1860s and 1890s, Australia was the richest country on earth.

In sum, the considered judgement of the Swiss historian Rudolf von Albertini, whose work – according to the world’s “leading imperial economic historian”, David Fieldhouse – was based “on exhaustive examination of the literature on most parts of the colonial world to 1940”, was simply this: “colonial economics cannot be understood through concepts such as plunder economics and exploitation”.

March 21, 2024

QotD: South Africa under Thabo Mbeki

Filed under: Africa, Economics, Government, History, Quotations — Tags: , , , , , , — Nicholas @ 01:00

[During Nelson Mandela’s presidency, Thabo] Mbeki quickly began to insist that South Africa’s military, corporations, and government agencies bring their racial proportions into exact alignment with the demographic breakdown of the country as a whole. But as Johnson points out, this kind of affirmative action has very different effects in a country like South Africa where 75% of the population is eligible than it does in a country like the United States where only 13% of the population gets a boost. Crudely, an organization can cope with a small percentage of its staff being underqualified, or even dead weight. Sinecures are found for these people, roles where they look important but can’t do too much harm. The overall drag on efficiency is manageable, especially if every other company is working under the same constraints.

Things look very different when political considerations force the majority of an organization to be underqualified (and there are simply not very many qualified or educated black South Africans today, and there were even fewer when these rules went into effect). A shock on that scale can lead to a total breakdown in function, and indeed this is precisely what happened to one government agency after another. Johnson notes that this issue, and particularly its effects on service provision to the rural poor, pit two constituencies against each other which many have tried to conflate, but are actually quite distinct. The immiserated black lower class (which the ANC purported to represent) didn’t benefit at all from affirmative action because they weren’t eligible for government jobs anyway, and they vastly preferred to have the whites running the water system if it meant their kids didn’t get cholera. The people actually benefited by Mbeki’s affirmative action policies were the wealthy and upwardly-mobile black urban bourgeoisie, a tiny minority of the country, but one that formed the core of Mbeki’s support.

That same small group of educated and well-connected black professionals was also the major beneficiary of Mbeki’s other signature economic policy: Black Economic Empowerment (BEE). Oversimplifying a bit, BEE was a program in which South African corporations were bullied or threatened into selling some or all of their shares at favorable prices to politically-connected black elites, who generally returned the favor by looting the company’s assets or otherwise running it into the ground (note that this is not the description you will find on Wikipedia). The whole thing was so astoundingly, revoltingly corrupt that even the ANC has had to back off and admit in the face of criticism from the left that something went wrong here.

What made BEE so “successful” is that it was actually far more consensual than you might have guessed from that description. In many cases, the white former owners of these corporations were looking around at the direction of the country and trying to find any possible excuse to unload their assets and get their money out. The trouble was that it was difficult to do that without seeming racist, because obviously racism was the only reason anybody could have doubts about the wisdom of the ANC. The genius of BEE is that it allowed these white elites to perform massive capital flight while simultaneously framing it as a grand anti-racist gesture and a mark of their confidence in the future of the country.

This is one particular instance of a more general phenomenon, which is that at this stage pretty much everybody was pretending that things were going great in South Africa, when things were clearly not, in fact, going great. But this was the late 90s and early 00s, the establishment media had a much tighter hold on information than it does today, and so long as nobody had an interest in the story getting out, it wasn’t going to get out. Everybody who mattered in South Africa wanted the story to be that the end of apartheid had resulted in a peaceful and harmonious society, and everybody outside South Africa who’d spent decades supporting and fundraising for the ANC wanted this to be the story too.

John Psmith, “REVIEW: South Africa’s Brave New World, by R.W. Johnson”, Mr. and Mrs. Psmith’s Bookshelf, 2023-03-20.

February 27, 2024

The Company that Broke Canada

Filed under: Business, Cancon, Economics, Government, History, Technology, USA — Tags: , , , , , , , — Nicholas @ 02:00

BobbyBroccoli
Published Nov 4, 2023

For a brief moment, Nortel Networks was on top of the world. Let’s enjoy that moment while we can. Part 1 of 2.

00:00 This is John Roth
02:04 The Elephant and the Mouse
12:47 Pa without Ma
26:27 Made in Amerada
42:15 Right Turns are Hard
57:43 Silicon Valley North
1:07:37 The Toronto Stock Explosion
(more…)

February 2, 2024

QotD: Financial bubbles

Filed under: Economics, History, Quotations, Technology — Tags: , , , — Nicholas @ 01:00

That financial markets sometimes go off on one has been noted for centuries now. Dutch Tulips, the South Sea Bubble, Dotcom and more recently Bitcoin have all shown that the lust for easy speculation profits can lead to, well, to financial excess at minimum. Those with an orderly cast of mind like to point out that all of this is waste. If instead the truly wise and clever people – after we’ve installed them in government or at least the bureaucracy – could apportion society’s assets very much better. You know, truly invest in the diversity advisers civilisation so badly needs.

The thing is, economists often disagree at this point. Sure, financial bubbles, they occur. Sure, there’s waste in them. But perhaps the very bubble itself is an either useful or necessary part of the process.

Necessary in that perhaps it needs a mania to get some new technology over the finish line. I tend to think it’s not going to happen with Tesla but it did with Railway Mania. Without speculators searching for easy money the network never would have been built out. Without Dotcom Amazon probably wouldn’t have got funded through the decade it was scratching a living.

It’s also possible that it’s just useful. For the overbuilding in the mania might then leave assets that are repurposed to get other technologies over that finish line into general use. Global Crossing lost a fortune – no, really billions – on building out fibre optic cabling to girdle the world. Which was, after the bankruptcy, bought up by the Googles and the like to carry all this web and video stuff. It’s arguably true that without the previous overinvestment we’d simply never have developed – or perhaps not for decades – such resource and bandwidth-hungry hogs.

Tim Worstall, “Cloud Rendering – The Latest Proof That Investment Bubbles Actually Work”, Continental Telegraph, 2019-03-17.

January 23, 2024

QotD: Shakespeare was apparently a terrible writer, according to Bayesian analysis

Filed under: Britain, History, Media, Quotations, USA — Tags: , , , , — Nicholas @ 01:00

When SBF (whose initials immediately joined those of MBS and JFK as being instantly recognizable) was first arrested, I immediately proposed a typology of financial swindlers with two distinct poles — though no doubt there is a continuum between them that somewhat reduces the elegance of my typology.

First there is the dull, seemingly steady, respectable type, instantiated by Bernie Madoff, who had just the kind of personal gravitas that inspired confidence in the cautious. “Yes,” the cautious type thought as he gazed into Madoff’s calm and wise face, “he is just the type to whom I can safely entrust my money. He knows, if anyone knows, how to make money fruitful and multiply.”‘ His very dullness obscured from the cautious man the fact that he, the cautious man, was as motivated by greed and lust for painless enrichment as the most reckless gambler; and no man wants to think that he is motivated by greed. That is a vice that motivates others, not oneself.

Second there is the flamboyant genius type. For more adventurous investors in search of quick returns, a man like SBF is just the one to follow. His refusal to comply with elementary social conventions, even his wild hair, stood guarantor of his genius. Those who followed SBF as the children followed the pied piper deluded themselves by the following false syllogism:

    Geniuses are unconventional.
    SBF is unconventional.
    Therefore, SBF is a genius.

(Actually, even his unconventionality was conventional. Convention is that from which no man can ever fully escape.)

The nature of SBF’s “genius” has come to light in his thoughts of Shakespeare, against whose genius he applies statistical reasoning:

    I could go on and on about the failings of Shakespeare … but really I shouldn’t need to: the Bayesian priors are pretty damning. About half the people born since 1600 have been born in the past 100 years, but it gets much worse than that. When Shakespeare wrote, almost all Europeans were busy farming and very few people attended university; few people were even literate — probably as low as ten million people. By contrast there are now upwards of a billion literate people in the Western sphere. What are the odds that the greatest writer would have been born in 1564? The Bayesian priors aren’t very favourable.

One could have a great deal of fun with this argument, for example by proving statistically that Isaac Newton was not one of the greatest physicists who ever lived, and indeed could never really even have existed, because the number of people in his time who could do simple arithmetic was so exiguous. How could he, then, together with Leibniz (another impossibility), have invented the calculus?

By contrast, we could also prove that we are living through a golden age of literature (as of every art) because there are now so many people who know how to write. Of course, our painting must be best because, comparatively speaking, our materials are so cheap and within the range of most people, all of whom have the time to take up painting. Think of how poor Spain was when Velasquez was painting! In Vermeer’s day they didn’t even have flush toilets! How, then, could his paintings be beautiful? Basquiat’s paintings must be much better because now we have electric light.

How could Dickens have been so funny when the infant mortality rate was so high and the life expectancy so low? Therefore, he was not funny. As for Mozart, he didn’t even have an electronic amplifier to his name, so how could his music have been any good? He hadn’t even heard of rap.

One swallow doesn’t make a summer, of course, or one vulture a flock, but one cannot help but remark that SBF was not some poor child who managed, by hook or by crook, to crawl out of a noisome slum, but the child of two professors at Stanford University (admittedly of law) who was himself expensively educated and who was, by the standards of 99.999 percent of all previously existing humanity (to use an SBFian type of statistic), extremely privileged. He was of the elite. His immortal thoughts on Shakespeare would not have been possible without his education, for they certainly would not have occurred to — shall we say — an illiterate illegal immigrant from El Salvador or Honduras.

No, it requires many years of training to come up with arguments such as his. And this in turn raises the question of what is going on in schools and universities (if, that is, SBF is not completely sui generis) that their alumni end up by saying things that make the pronouncements of Azande witch doctors look like those of the latest science. Perhaps — and let us hope that — SBF is not typical of his breed.

Theodore Dalrymple, “The Literary Financier”, New English Review, 2023-10-21.

January 13, 2024

The ongoing encrapification of the internet – “When I hear the phrase ‘web platform’ I reach for my gun”

Filed under: Business, Economics, History, Media, Technology — Tags: , , — Nicholas @ 05:00

Ted Gioia used to be a techno-optimist, eagerly looking forward to ever-improving online experiences. He, like so many of us, has reluctantly come to the conclusion that those hopes are fading out of sight:

I once loved new technology. I lived in the heart of Silicon Valley for 25 years, and was bursting with enthusiasm for its free-wheeling mission to transform the world — and have some fun along the way.

When the Worldwide Web made its debut, I thought I’d found Nirvana. It was like tech was turning everything into a game.

But look at me now. When I hear the phrase “web platform” I reach for my gun.

Where did it go wrong? Did I just get old and embittered? Or did something change in the tech world?

Let me share a story that might help us decide.

What kind of business spends hundreds of billions over 10 years — just to get worse?

This is a story about the birth of the search engine.

There were no commercial search engines back in 1993. But a Stanford student named David Filo compiled a list of his 200 favorite websites.

His buddy Jerry Yang helped turn this into an online list. They called it “Jerry’s Guide to the Worldwide Web”. Filo and Yang added new websites every day to their list — and classified them according to categories.

This turned into Yahoo.

Here’s my favorite part of the story: These two students didn’t even know they were running a business.

They did it for fun. They did it out of love. They did it because it was cool. “We wanted to avoid doing our dissertations”, Yang later explained.

But a venture capitalist named Mike Moritz heard about Filo and Yang, and tracked them down. The founders of Yahoo were living in total squalor in a trailer littered with stale food and pizza boxes, strewed alongside sleeping bags and overheating computers. A phone rang constantly — but nobody bothered to pick it up.

Moritz was dismayed by this dorm-room-gone-wild ambiance, but he was impressed with the students’ web searching technology. So he asked them the obvious question: How much did they plan to charge users?

Filo and Yang had no answer for this. They wanted to give their tech away for free.

Yahoo wasn’t even selling ads back then. It wasn’t tracking users and selling their private information. It didn’t even have a bank account.

But it was a community and had millions of users.

That was a word you heard frequently in Silicon Valley in the early days. People didn’t build web platforms — they formed online communities.

It was a FUN community. People enjoyed being a member. Even the absurd name Yahoo was part of the game — although early investors hated it.

Yang’s job title was “Chief Yahoo”. Filo’s position was “Cheap Yahoo”.

Investors always hate those kinds of things.

But a new web business, back then, was expected to have a silly name. Here are some of the websites launched in the mid-1990s.

Moritz wanted to turn Yahoo into a business. And the founders realized that their fun community was growing faster than they could handle in their down-and-out trailer. So they sold out 25% of Yahoo for $1 million.

November 20, 2023

The latest scam – Natural Asset Companies (NACs)

Filed under: Economics, Environment, Government, Politics, USA — Tags: , , , — Nicholas @ 05:00

Elizabeth Nickson on the US Securities and Exchange Commission’s plan to magic up some new ways to “financialize” national parks and other federally regulated places for the benefit of the hyper-wealthy and well-connected:

Soon to be a financially performing asset of BlackRock?
Grand Canyon of the Yellowstone, 21 June 2021. Photo by Grastel via Wikimedia Commons.

Delayed but not stopped, the U.S. government is planning a rule that allows for America’s protected lands, including parks and wildlife refuges, to be listed on the N.Y. Stock Exchange. Natural Asset Companies (NACs) will be owned, managed, and traded by companies like BlackRock, Vanguard, and even China.

The deadline was Friday, but earlier this week, the deadline was postponed until January. This is the usual criminal feint from the environmental movement and the administrative state. People are complaining? Let’s put it off till they go back to sleep. Then we will steal their birthright late at night, in precisely the manner we have stolen everything else.

[…]

The entire universe envies the lush interior of the U.S. Increasingly empty, it is filled with a cornucopia of minerals, fiber, food, waters, extraordinarily fertile soil as well as well-ordered, educated, mostly docile people. Worth in the quadrillions, if one could monetize and trade it, financialize it, the way the market has financialized the future labor of Americans, well, it would be like golden coins raining from the sky.

On October 4th, the Securities and Exchange Commission filed a proposed rule to create Natural Asset Companies (NACs). A twenty-one day comment period was allowed, which is half the minimum number of days generally required and when they postponed passing the rule, they did not extend the comment period. “Nope, shut up,” they said.

NACs will allow BlackRock, Bill Gates, and possibly even China to hold the ecosystem rights to the land, water, air, and natural processes of the properties enrolled in NACs. Each NAC will hold “management authority” over the land. When we are issued carbon allowances, owners of said lands will be able to claim tax deductions and will be able to sell carbon allowances to businesses, families and townships. In the simplest of terms, that’s where the money will be made. WE peons will be renting air from the richest people on earth.

The following are eligible for NACs: National Parks, National Wildlife Refuges, Wilderness Areas, Areas of Critical Environmental Concern, Conservation Areas on Private and Federal Lands, Endangered Species Critical Habitat, and the Conservation Reserve Program. Lest you think that any conserved land is conserved in your name, the largest Conservation organization in the U.S., is called The Nature Conservancy, or TNC, which, while being a 501(c)3, also holds six billion dollars of land on its books. Those lands have been taken using your money via donations and government grants, and transferred to the Nature Conservancy, which can do with those lands what it wills.

If this rule passes, America’s conserved lands and parks will move onto the balance sheets of the richest people in the world. Management of those lands will be decided by them and their operations, to say the least, will be opaque.

μολὼν λαβέ, buddy.

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