Can alternatives to capitalism avoid causing civilization to collapse?

A: maybe. Why? Because all the other economic systems are unworkable. 

[An expanded version of this note is available on Medium [gift link]]

If capitalism is destroying civilization, then maybe alternative economic systems might be better. Even if human nature is magically changed for the better, popular alternatives like socialism and communism, and lesser known systems like gift economies that have worked for pre-technological communities of a few scores of people, have fundamental problems when applied to a global population of billions. If civilization is to survive, then we must discover how to somehow make the self-interested basis of capitalism work for survival, not against it. To survive itself, sustainable capitalism must be more profitable than unsustainable capitalism.

 The big picture of civilization's trajectory is easy to get lost in the sturm und drang of everyday international conflict with world leaders continually threatening nuclear apocalypse. Nevertheless, with lifespans in developed countries exceeding three quarters of a century, many of us will live through several shorter cycles and should try to plan for the longer trends. Here's a briefest possible summary.  The details are incredibly complicated, and intrinsically unpredictable, both mathematically and psychologically.  But there are some key poins.

Uncontrolled capitalism destroys itself 

Uncontrolled markets become monopolies and destroy themselves.  Sustainable markets depend on participants agreeing to not be losers, and creating governments and government agencies that prevent runaway monopolization.

Uncontrolled, pure capitalism reduces all activity to monetary transactions, which are intrinsically zero-sum with equal amounts of winning and losing, because accounting requires that the books be balanced.  The sum of all the debits must equal the sum of all the credits.  

Uncontrolled capitalism produces a spectrum of capitalists and workers with inequality that inevitably grows greater over time, because of hypercompounding: compound growth means that more capital you have, the more capital gets added to that at every step.  Modern electronic capitalism provides zero-fee investment accounts that permit even the poorest people to become capitalists and multiply their investments via compound interest.  But the rich become richer faster: More capital means greater access to resources enabling complex, fancy stratgies with even greater rates of return. 

As a side effect, uncontrolled capitalism produces waste that inexorably accumulates to levels that impair productivity growth.

Pollution continues to increase costs of production until costs exceed profits. Without net profits, growth stops, and the system shrinks.  It can be an orderly shrinkage, or a catastrophic collapse. If ways cannot be found to reduce the amount of pollution relative to growth, a cycle of growth and collapse becomes established.  Because much pollution can't be remediated, each collapse is deeper than the last, and the peak of growth is lower.  The cycle of growth and collapse has a long term declining trend, whose bottom is hard to predict.

Alternatives to capitalism contradict themselves, and don't scale 

Comprehensive socialism, AKA Communism, is intractable at scales larger than a few hundred people. Due to the complexity of communications required to make collective decisions, communist societies evolve hierarchical organizations, which inevitably lead to authoritarian, centrally-managed economies. Centrally managed economies require exponential amounts of computation to determine optimal allocation of productive resources, and their hierarchical organizations necessarily discard knowledge needed to account for local variations in requirements as they attempt to fulfil global goals. Moore's Law predicts that exponential growth in algorithmic power may be able to overcome the exponential demands of larger organizational units, but it cannot address life's hidden complexities.  All socialist societies to date have failed; the ones that have not failed, e.g. China, incorporate major capitalist components that implements decentralized economic decision-making.  

Regardless of computational concerns, communism's most idealistic promise to do away with money and allocate resources "from each according to his abilities, to each according to his needs" explodes under the paradox of "My need is to have more than anyone else."  What gives anyone, or any resource allocation committee, the right, or even the ability, to determine what my needs are?

Just as true socialists want to do away with private property, there's a possible mode of capitalism that would do away with private property for nearly everyone.  The recent explosion in purchases of property by private capital could lead to a situation in which nobody owns their own home except the very wealthy, and everyone else is forced to be a renter. The same transition could occur for what is most peoples' second largest purchase, their cars. These trends would lead to a situation reminiscent of medieval feudalism, with a small number of corporate "landed gentry" exercising lordship over a large population of propertyless serfs.

Zero-sum extractive capitalism relies on contradictory assumptions. There are not enough resources to go around: anything that I obtain must be taken from someone else.  Yet, there are unlimited resources to be taken; otherwise there is no growth. As the reality of a bounded world takes hold and resources run out, the capitalists's goal is to be the Last Man Standing, holding out until the bitter end after all rivals have passed away.

The rise of ultra-cheap renewable energy has led to the possibility of a petroleum apocalypse marked by the end of burning fossil fuels for energy, leaving a much smaller amount of production to be used for chemical products such as plastics.  Exxon Mobil, for example has been steadfast in holding to fossil fuel production, evidently intending to use its vast size to outlast competitors as global demand for oil and gas inexorably shrinks.

Can greed overshadow human nature?

Economies have their foundations in material, cultural and psychological values. Those values emerge as near-unconscious preferences for different solutions when people encounter resource allocation problems, which can bias or even override rational analyses of the best ways to divide things up.  Not subject to the arithmetic rules of monetary accounting, they can encompass a far wider range of aspects for each transaction, yet still produce a conclusion of "better" or "worse" in the end.  People vary widely in their selection and weighting of those aspects, but they can be roughly categorized into "win-lose" (zero sum) or "win-win" (positive sum) outcomes.

 

In a variation of the dictator game [alas, I've lost track of the specific reference], researchers have found that as many as 20% of their subjects will prefer a lose-lose outcome in which everyone ends up losing, as long as their counterpart ends up in an even worse situation. In the United States, political trends for the past decade or so suggest that this fraction may be as much as 40% of voters for many issues.

The problem for a manager, or a board of directors choosing a CEO, is when strategic decisions must be made, should they choose the path that feels good, or the path that makes them the most money? Politicians have an easier choice: they need to support policies that make their own supporters feel good.   Mercenary politicians soliciting campaign contributions need to convince mercenary contributors of the wealth-enhancing effects of their contributions, while using them to stoke the often-irrational passions of voters.

 

The drives for dominance are embedded incredibly deeply into Western culture, and pervasively mask the effects of cooperative growth and wealth. Even in supposedly objective economics textbooks, the fundamental principle that “people respond to incentives” somehow does not apply in the same way to workers as it does to executives.CEOs are given enormous quantities of company shares, while individual contributors are expected to be content with cost of living increases in salaries and wages.

Co-ops align incentives across stakeholders

Alignment of employee incentives with company performance reaches a zenith for employee-owned co-ops. In that structure, worker incentives are fully aligned with corporate success. However, there remain other contributors to corporate success whose incentives remain unaligned, and bringing them into the picture requires other kinds of organizations that are even more rare. Customer co-ops such as mutual insurance companies, or REI outdoor equipment, strive to put the interests of customers first. Supplier co-ops for farm production are not uncommon in the US Midwest, where one can see the Co-Op logo on grain elevators. Management groups routinely take over their own companies, although this usually occurs via leveraged buy-outs, making the true interest that of the holders of the debt rather than the managers responsible for sustaining the company.

To achieve complete alignment, a company would need an ownership structure that balances the interests of all five direct stakeholders: customers, employees, managers, suppliers, and pure investors. Achieving this kind of governance design is complex, and has not been attempted to my knowledge. A movement for “stakeholder capitalism” has achieved notable support, but it is still focused on voluntary and often token gestures towards inculding additional groups, rather than providing formal, effective control mechanisms for input into corporate decision making by groups whose actions can be explicitly stated and coordinated. 

Finance firms have a focus on total returns that can override irrationalities

Countering the irrationalities of “all for me” and “who cares who gets hurt?”, and the pseudo-rationalities of zero-sum no-growth economics, it finally may fall to financially sophisticated investment firms to realize the benefits of stakeholder alignment. They have the resources to perform the in-depth assessments to discover good management practices and share allocation policies. The most sophisticated of them will understand the nature of ergodic statistical distributions to detect the influence of long term perspectives in short term financial performance. Investment fund constructors and hedge fund managers who can recognize these advantages, and the stakeholders in their investment targets, will achieve growth advantages and become billionaires faster, and their clients and those who follow them will gain proportinately.

If capitalism cannot save itself, and non-capitalist forms of economic organization are unmanageable or unscaleable, a hybrid form may be able to moderate the worst excesses of each. Governments can establish regulations to stabilize runaway capitalist phenomena such as monopolies and the destruction of commons such as air and water quality, and fully take over sectors such as healthcare and common infrastructure like roads, water and sewer services and electric and gas distribution, and police and fire protection, where the conditions for functioning markets are not present. In 1787, the founding document of the current United States government stated that its purposes included “to promote the general welfare”. Many influential citizens and politicians appear to have abandoned this goal, but they do so at their peril. Is there a limit to how deeply civilization will fall once growth becomes impossible and collapse begins? No one knows the minimum number of people needed to support an advanced technological civilization such as the one that exists in developed countries. If we cannot make global economies sustainable at our current level, we will find out.

Prioritizing longevity research

 As one gets older, the effects of age begin to overtake the vigor of youth.  Those troubles are distracting and annoying, not to mention sometimes painful.  Inevitably, I suppose, they grow until the effort of sustaining daily life exceeds the amount of time and resources available to counteract and compensate for their penalties.  Ideally, a lifespan would be akin to that of the Deacon's Wonderful One-hoss Shay in the poem by Oliver Wendell Holmes, which operated perfectly for a hundred years, and then instantly and completely collapsed into a pile of rubble. The poem's author prefigured Star Trek's Vulcan philosophy in its final line "Logic is logic, that's all I say."  Makes sense to me, too.

Longevity researchers distinguish between lifespan and healthspan. The Holmesian ideal is that they are identical. Instead of ageing being a long slow decline, it should be possible to live a full, active life right up to the very end.  I've always imagined that being struck down by lightning while hiking in the mountains would be a satisfying way to go, except for the burden on rescuers who would have to retrieve my remains.

In short:

Longevity research shouldn't waste effort on making the longest possible life even longer. Nobody wants to spend decades of mental and physical disability, surviving in assisted living facilities on the efforts of ever more scarce younger, more able bodied caregivers as populations become older. (Robots will save us!)  This means that priority should be given to research aimed at chronic and disabling illnesses, affecting:

- cognition
- vision
- mobility, including metabolic declines in stamina and strength
- hearing
- immunity and organ replacement
- not to mention obesity per se

This by no means excludes basic research.  It's important to remember that the line of research that led to the GLP-1 receptor agonists that have revolutionized weight loss, was pivotally influenced by the discovery of a similar protein in the venom of the Gila Monster lizard, that had been incidentally described as part of a general catalog of the venom's components.

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Why is simplicity so hard?

I used bound notebooks for note taking for many years, and accumulated a dozen volumes of them.  But I've moved online for everything except critical, mostly financial notes.  I pay for Evernote.  It's gratifying that they regularly find and fix bugs, but they keep adding features that I don't want and don't use.

Fred Brooks, in the classic book The Mythical Man-Month, observed that there comes a point in the lifecycle of large software systems where an attempt to fix a problem introduces as many or more problems as it remedies. Many of the advances in software engineering technologies are intended to raise the levels of scale and complexity that can be achieved before this threshold is reached.

A similar phenomenon has been observed in evolutionary biology, where it's called Cope's Rule.  Over time, members of lineages tend to increase in body size, until they get so large that they can't survive.  And of course evolution by random variation and natural selection leads to distributions of individuals that include members that are more and more complex over time, because while ecological niches may fill up, "there's always room at the top" for more complexity.

Evernote isn't yet at the point of net zero returns on improvement efforts, but they're working on it.  It takes a lot of management discipline to stifle the urge to keep adding "just one more cool thing" and say that a product is complete.  "Complete" is incredibly easy to interpret as "done for", i.e. dying.

My online note taking needs are simple:

Goes without saying:

• Notes must be searchable, both within and across notes
• Must have a simple editor that supports headings, indentation, bulleted and numbered lists.  That is, formatted with a WISIWYG frontend on a text backend

 Not so obvious:

• persistent - exportable to filesystem, e.g. in HTML
• collaborative - Syncs character by character across users
• sync among multiple platforms in use by a single user is a side effect
• structured - Three+ levels of nesting
• provides for links between notes and hyperlinks outside of the note-taking system
• multi-platform - Mac, iPad, iPhone, Windows.  Linux & Android optional

Wants:

•  versioned - "save a checkpoint now"

I'm tracking eighteen diferent note-taking apps, but haven't yet identified my next generation tool.  I have four months before Evernote autorenews for another year's subscription.

 

A strategic growth strategy for HP Inc. is boxed in on all sides

It's a big box, but it isn't growing.  And HP is too big to create new kinds of boxes, so the one path out isn't promising for them .

Journalists, tech pundits and investment analysts always thought of Hewlett-Packard as "PC and printer company HP", while it was far more than that.  So eleven years ago it split into HP Inc.(HPQ), an actual PC and printer company, and Hewlett Packard Enterprise (HPE), a company that did all sorts of computer-related things for other companies, including building supercomputers. 

HPE then dropped off the radar of everyone except specialist IT observers.  I wrote about its strategic limitations here in 2016, and those limitations haven't changed.  Its latest attempt to expand beyond its own box is an attempt to purchase Juniper Networks, which has been blocked by the US Dept. of Justice on antitrust grounds.

HPQ has two centers of focus, unsurprisingly desktop and notebook PCs, and printing on letter-size paper. Many people might be surprised to learn that its commercial aspects of these centers dwarf the consumer aspects, by three or four to one.  HPQ was recently in the news when it instituted, and then quickly dropped, a minimum 15-minute wait for free telephone support in five European countries. Although it triggered a lot of news coverage, the move didn't impact the bulk of HP's customer base, who provide their own customer support, and use HP's support services only for paid escalation incidents.

Strategically, attempting to economize on customer support expenses is a result of the box that HP is trapped in. PCs are a commodity product with fierce competition that keeps profit margins low. Top line growth is out of HP's hands, closely tracking economic booms and recessions. The only place available to increase margins is to cut costs, and expensive live support calls are an obvious target.

The commodity nature of HP's product lines, in concert with its great size, place severe limitations on its ability to innovate. Modern HP has never had visionary leaders to match its ancestral founders Bill Hewlett and David Packard, or even Compaq founder Rod Canion, who was fired in 1991. Its low margins and lack of vision mean that it doesn't have the time or patience to grow new businesses from tiny beginnings.  It has attempted to innovate by acquisition, but its history has been filled with inexplicable acquisitions of failing companies that it was unable to turn around.  HP's sheer size is a major impediment to innovation, since its organizational structure has been optimized to the point that any product line with less than several billion dollars in sales will be wiped out in the internal competition for resources.

Expanding HP's PC box with technical innovations is blocked in every direction: software, bigger and better screens, products smaller than the desktop, head-mounted virtual reality and augmented reality headsets, externalized "cave" virtual reality, and voice interaction".  HP has no room to lead in any direction.

Expanding the printing box with technical innovations has had more success, but nearly all of these directions have been exploited to their limits.  HP has no room to pioneer in the dimensions of bigger pages, faster printing, or 3D printing.

[You can find a version of this post with a bit more detail on these two boxes in an article at Medium.]

One frontier in printing remains open. Printing always occurs onto flat surfaces. Getting text and imagery onto non-flat surfaces, called "conformal printing", usually is done by printing onto a flat sheet, then applying that sheet to the target surface. Decals and vehicle wraps are widespread examples of this method. Methods without a carrier sheet that is applied to the object involve floating the ink on a liquid surface and lifting the object through the pattern, or coating the object with a photosensitive layer, projecting the image onto the object, and then chemically or optically fixing the latent image to the object.

Conformal printing techniques that build upon HP's proprietary technology could include mounting an inkjet printhead on a robotic arm that tracks the crests and dips of the object's surface, creating a flexible inkjet bar that sweeps across the curves of an object's surface, or exploiting a multi-material 3D printing system to create embedded imagery akin to the age-old millefiori glassworking technique.  Once multi-material 3D printing is available, enabling it to create embedded text and images requires only software development. Embedded text is especially suited to purposes such as serial numbers, since because they extend deep into the object, they cannot be removed without destroying it, although they can be covered up.

Conformal printing is a relatively small expansion of the market for flat printing, but it leads to enormous potential in its ultimate expression as active, smart paint, or more generally, smart surfaces, accomplished by extensions of each of those same three general methods.  The goal of those R&D programs is to duplicate and exceed the complexity, speed and dynamic pattern changes of squid & cuttlefish skin, and the adaptive textures of octopus skin.  Active smart surfaces promise uncountable opportunities that encompass capabilities that are unimaginable today.

Yet in the near term, the best available "strategies" that occupy the imaginations of investors are simply to track global economic and technological trends.  The latest standards in "AI PCs" promise to bring the unprecedented computational demands of machine learning to the desktop and laptop, while ML will enable self-optimizing printers.  These trends should drive a replacement cycle that can recover momentum lost to longer product lifespans of devices that have reached a maturity stage where customers' devices have become able to fully match the best that they can imagine.

Disclosure

I have held HPQ stock since HP Inc. was created by the division of Hewlett-Packard, reinvesting dividends as part of a buy-and-hold strategy.

The illusion of growth: "inflation" is only a third of the real story

 The Social Security Administration notified me of my next year's benefits a few days ago.  The notification letter asserts that my benefits increased by 2.5% over last year, but my take-home payment will actually increase only 2.07% after all the Medicare deductions.  Luckily, I invested my 401(k) retirement plan funds in index funds, so they are capturing some of the excessive profits skimmed off by insurance companies, pharmacy benefit managers, and other healthcare companies. 

According to the Bureau of Economic Analysis, "From the same month [in 2023], the PCE price index for January [2024] increased 2.4 percent. Prices for services increased 3.9 percent and prices for goods decreased 0.5 percent. Food prices increased 1.4 percent and energy prices decreased 4.9 percent. Excluding food and energy, the PCE price index increased 2.8 percent from one year ago."  So that 2.5% Social Security benefit increase doesn't seem totally unreasonable, aside from the fact that it's nearly a year out of date with respect to my current income and expenses.

So why do I, and so many other Americans, feel that our money isn't going as far as it used to?  Maybe because it isn't?  Unlike economists and economic journalists, we're concerned with value for our dollars, not merely prices, and not the rate of price growth that's called "inflation". And our memory extends longer than a year.

We remember this: since before the Covid pandemic in about 2018, the official PCE price index has risen over 20 percent.  And that index excludes gasoline and food, which have risen even more.  The PCE has risen over 40% since the most recent recession, and the amount of value a dollar provides has shrunk correspondingly.  I don't know who to feel more sorry for, the Americans who have to suffer from their loss of buying power, or the deluded economists and the clueless journalists who listen to them and tell us that our own experiences are wrong, and everything is good since wages have gone up too.  They don't care to notice that it's not the wages of the typical worker which have gone up, but the income from the wealth of the rich who have gotten richer far faster than the rest of us. And to add insult to injury, they promise that prices will never go back down as long as they have anything to do with it. The fabled rising tide doesn't lift leaky boats.

Loss of buying power is worse that rising prices suggest.  Lots of people have recognized "shrinkflation" when the same size package contains less stuff.  Marketers hope that you won't notice when the same size box creates an illusion that you're getting the same value for your purchase, while their profits go up because they give you less of what they're supposed to be selling.

Measuring shrinkflation is tricky, because it requires going into the details of how the data that composes an inflation index is compiled and entered into the index.  Sometimes an item may be measured by its container price, and sometimes it's measured by the unit price.  Some indexes may log a box of cereal by its price per box, and other indexes may log the cost of the same box of cereal by its price per ounce, regardless of the number of ounces in the box.  But even the most careful research organization is unlikely to count the number of chocolate chips per cookie, or the number and thickness of pepperoni slices in a pizza. 

The US Bureau of Labor Statistics has studied how shrinkflation affects the Consumer Price Index, and concluded that the effect is miniscule. When they looked at datasets that corrected for items whose quantity had changed between 2015 and 2019, they found the biggest effect in the category of Household Commodities and Services, which changed from 14.31 to 14.26, a difference of 0.05, about a third of one percent.  Considering how outraged consumer reporter articles are about shrinkflation, they are wildly overreacting.  I was surprised, too. It's possible that shrinkflation has increased along with monetary inflation since 2019.  Everyone should encourage the BLS to update their study regularly. In any case, it is annoying to say the least to discover that a manufacturer has pulled such a sneaky trick on you and effectively raised their price, hoping you won't notice. The fact that only a small number of manufacturers do such things doesn't make the practice any less offensive when it occurs.

The third form of inflation is even more insidious. Manufacturers can use lower quality ingredients or components in their products, and service providers can intentionally become sloppy or slow or reducing the feature richness in their work, while keeping prices the same or even merely lowering prices more slowly than they reduce their costs, thus increasing their profits.  There's no popular name for this practice, but "qualflation" works for me.  Some tech-oriented people might think of "enshittification", which was chosen as the 2023 word of the year by the American Dialect Society, but this word encompasses all forms of inflation. Whatever you call it, it's difficult for economists to measure, since it requires deep dives into supply chains and defining quality test procedures for every single one of the thousands of items that go into inflation indexes. Qualflation, because it's even sneakier than shrinkflation, is that much more offensive when it's discovered.  If you're outraged by it, your outrage is justified.

The remedy for all three forms of inflation is a free market with multiple suppliers producing a variety of variations on every service and product, or better yet, advanced markets with ecosystems of independent standards and unbiased testing organizations that produce regular reports. But a national currency doesn't exist in a free market -- there are commonly no choices of what money to use when buying something, except in rare situations such as the duty-free shops in international airports. And when governments allow monopolies or near-monopolies to arise, shrinkflation, qualflation, or simple price rises inevitably follow.

For complicated reasons, an economy with multiple currencies doesn't work well.  The United States had many private and state currencies until 1863, and many problems along with them. And since the release of a Bitcoin implementation in 2009, cryptocurrencies have been promoted as a new alternative to government-backed money.  Cryptocurrencies are working about as well for buying things as private currencies did in the past, that is not very well. "Crypto" is evolving into just another collectible asset of little intrinsic value, like fine art or Hummel statuettes. Like other collectibles, crypto has a robust free market, but Grandma isn't paying for groceries with Bitcoins any more than she is with Hummel certificates.

In the Federal Reserve Act (as amended), Congress gave the Federal Reserve System its fabled "dual mandate" of price stability and maximum sustainable employment.  The members of the Fed's Open Market Committee, in their wisdom, have decided to say that money with an inflation rate of 2% counts as "stable prices", and that anything lower is incompatible with maximum employment.  They prefer to try to fool everyone into thinking that growth is occurring, and will continue to occur, so that it makes sense to hire more people to cope with that future growth. Pay no attention to the slow loss of value in the dollar that results.  So far, they've succeeded, and consumer complaints about how high prices never go down have been successfully ignored.

Improving the best grilled cheese sandwich

In 2022, I wrote an article on Medium about The Two Secrets to the Best Grilled Cheese Sandwich. The two secrets are to do these two simple things: (1) use mayonnaise instead of butter, and (2) use real American cheese.  I included a bonus secret: use plain white, square sandwich bread.

That's about it. It's near perfection.  But "near perfection" still leaves room for improvement, or at least variation without loss of quality.  Here are two more things you can do to add variety to the perfect grilled cheese.

Using two slices of cheese, of course, sprinkle some crumbled feta or blue cheese or gorgonzola (which is more green than blue, to my eyes) between the slices before assembling the sandwich.  This will add a bit of salt and umami flavors, although American cheese is already pretty salty.

Try Fontina cheese instead of American.  This melts just about as well, but with a bit different flavor profile.  You could also try Mexican Chihuahua cheese, but you may have to go to a Mexican supermercado to get it.  It's a rare find in a mainstream supermarket, even in the Southwest US, where they often have an entire section of Mexican cheeses.

When something is so near perfect, almost every change is a downgrade.  These tweaks aren't downgrades, which is something else.

Irresistible attraction, insatiable consumption: the obesity epidemic was inevitable - hyperpalatable food just makes it worse

So incredibly delicious, you can't stay away, can't stop. Buy more now!  It's so much better than reading about why it's true!

(This is an abridged version of an essay that was posted on Medium.)

Three years ago in September of 2021 in a blog post titled "Is obesity research too hard?", I observed how difficult obesity research is, and suggested that it might be too difficult for the scientific methods available in the early twenty-first century.  It's even harder than that: here's one set of reasons. [Sorry about the malfunctioning link; the post is on page two, and Blogger's HTML anchors don't recognize that it's not on the front page.]

Most animals obtain their energy supplies by eating food - it's essential for survival. Most of the time, animals find themselves in resource-constrained environments, and feeding systems that work by "eat as much as you can, whenever you can" without any upper limits, work just fine at keeping obesity from becoming a problem.

But after eons of biological evolution and technological development, human civilization achieved prosperity, and invented refrigeration and transportation that made more than enough food available all the time.  According to the US Bureau of Labor Statistics, in 1901 Americans used 42.5% of their expenditures for food., while by 2002 those expenses had declined to 13.1%., and by 2022 all the way to 6.7%, a reduction of 84%. For North Americans, food is an unlimited resource year round, and we have only ourselves to rely on to keep from getting fat. Our evolutionary history has never before needed to cope with this situation. Without the evolution of new forms of food intake regulation, obesity epidemics are inevitable.

Managing food intake to match energy consumption has two major components: appetite, that is obtaining and ingesting food, and satiation, stopping ingestion when enough has been consumed. These have to balance over the long term.

Then, achieving the balance between appetite and satiation are, at a minimum, five interacting behavior-physiological subsystems. Driving appetite are foraging, which I blogged about earlier, which gets the organism close enough to the food to trigger eating behavior.  Eating is closely followed by ingestion, which is succeeded by digestion, which creates circulating nutrients processed by the organism's metabolism.

Each of these stages sends signals to the others to drive or inhibit their activity.  One of those feedback loops goes between foraging, eating, and ingestion. This makes the very acts of finding and consuming food become ends in themselves. Chefs know that the presentation of the food is an important part of the dining experience -- diners simply enjoy looking at a well-composed arrangement of artfully shaped and colored edibles on a plate.

Food producers and processors, whose mission is to sell more of their product without regard for the welfare of their customers, have learned how to make their foods hyperpalatable, exploiting the positive sensory properties and flavors to keep eaters eating, and buying more.  The salty snacks industry has been most successful at this takeover of the food consumption behavior system, whose adaptive value is enormous when the organism is in a nourishment scarcity environment.  Grilled and smoked meats come in second for hyperpalatability, but their producers have been less successful at creating a mass-distributed product.  In a nourishment rich environment, eating for the sake of eating acquires more negative effects than positive ones. This takeover reached what may be its ultimate expression in the slogans that promoted Lay's potato chips: "Bet you can't eat just one," and reaching the end of the bag of chips: "Don't worry, we'll make more."  The clear message is to keep eating, and don't stop, ever.

The result of these interactions is that people will eat even when they're not hungry, and keep eating even beyond the point of satiation. Their tissue mass will accumulate faster than it is depleted and their weight will go up, regardless of any steady state energy balance levels.

Medical researchers and pharmaceutical companies have searched for decades for drugs that can affect the weight regulation system. And they've found them: Wikipedia lists 38 different drugs with appetite suppressant effects. Each of them has many effects in addition to appetite suppression,  Which effect is a primary one and which is a side effect inevitably depends on the user's goals and perspectives.

The latest example of this rainbow of capabilities is the family of drugs called GLP-1 receptor agonists. Originally discovered by studying the causes of the remarkable metabolic capabilities of the Gila monster, a lizard found in the deserts of the Western US, they turn out to be "not only effective in metabolic diseases [such as type 2 diabetes and obesity] but also play a role in non-metabolic disorders, affecting multiple systems including the musculoskeletal, nervous, cardiovascular, and digestive systems, and can even have implications in oncological diseases."

Drug companies are spending major resources promoting GLP-1 receptor agonists as a panacea, of course. In a tour de force of marketing, one of them, Novo Nordisk, is distributing the single drug semaglutide under three different names: injectable Wegovy for obesity, injectable Ozempic for type-2 diabetes, and oral Rybelsus for type-2 diabetes.  It can do this by exploiting the US drug regulation framework, which gives them a set of patents on semaglutide formulation that will expire over years ranging from 2026 to 2041, and allow them to monopolistically charge prices that may be more than 250 times its cost to make..

Marketers and enthusiasts will avoid telling you about the side effects of weight loss drugs, which are serious enough that most people who started taking anti-obesity medications stopped using them within a year.  People trying Wegovy were best at staying with the program, but only 44% of them lasted a year.

If you're an American reading this, it's more likely than not that you're overweight.  Lots of organizations are happy that you're that way, and few have incentives to help you manage your weight effectively.  Food producers want you to eat more of their products, regardless of your weight condition. They're working hard to develop ever more hyperpalatable foods to keep your binge eating bouts going. Drug manufacturers are happy to have more overweight patients who will pay high prices for their weight reduction drugs. Purveyors of diet plans want you to use their plan and avoid other plans, regardless of whether it's the right one for you.

Healthcare providers have lost what benign incentives they ever had.  For a brief period in the 1970s researchers had discovered that "health management organizations" (HMOs) that focused on improving health for their clients had less expenses and better patient outcomes than fee-for-service insurance systems.  But then HMO managers discovered that care denial strategies were even more profitable than complicated health promotion programs, and now HMOs are just another, more restrictive, insurance offering.

Against these powerful economic forces, individuals who want to reverse their weight increases have a tough road ahead.  The idea that there's no royal road to weight loss, and that each person needs to find a path that works for them and may be different from everyone else's is a revolutionary one. Biology may be destiny, but controlling your own biology without the necessary data and personalizable systems analysis tools that have not yet been devised, must be done by trial and error.  Keep trying, and don't give up until you find a method that works for you.  Good luck! 

Should Companies Be Owned by Their Workers?

 Freakonomics Radio asked this question last month.  They weren't sure.  But they thought it was interesting to interview Pete Stavros, a senior executive at private capital firm KKR.  Stavros observed that employee-owned companies were 2% more profitable than conventionally owned ones, and he convinced KKR to give a form of employee equity to some of their own companies.  Stavros seems sincere in his belief that he's found a win-win combination that benefits both the private equity firm and the employees, but if you think about it a bit more deeply, you discover that his pitch is an illusion.

When it institutes employee ownership, it gives employees shares in the company, which gives them a stake in the company's success.  The idea that owners must inevitably exploit their workers in order to maximize profits is deeply ingrained in the thinking of KKR's kind of capitalist, so much that they were surprised that workers with a stake in their company were more productive.  Communist Russian dictator Josef Stalin was also surprised, when he allowed families to farm small plots of land for their individual use, in addition to the faceless collective that the New Soviet Man would slave for, and the private farms were more productive.

But unlike the Stalin-era farmer, and unlike traditional Employee Stock Ownership Programs (ESOPs), the kind of ownership given to KKR workers is an illusion, not as good as profit sharing (profit sharing is also good, despite it not coming with any "ownership"), since it exposes the workers to capital losses as well as capital gains, and gives the true owners, the KKR managers, another way to blame the workers instead of themselves when purchased companies ultimately fail.

"Ownership" is real only when it includes control.  This would mean giving the employees a seat on the board of directors, and giving employee shares voting power for board seats in the same way that shares in conventional public companies come with the ability and responsibility to vote for board members.  You can bet the KKR would never go for such an arrangement.

The best form of employee ownership, even beyond ESOPs, is to become a fully owned employee co-op.  But even more than ESOPs, co-ops are complicated to set up, and their advantages may even be opposed by deep aspects of human psychology.  Investigating that will be another blog post.

Why the Xerox Star failed

"That trick never works!" - Rocket J. Squirrel

or

Single-purpose machines built by lone geniuses for other lone geniuses don't scale.

The Xerox Star was an attempt to commercialize the pioneering computers that emerged from Xerox's PARC labs in the 1970s.  They started with machines called the Alto, and continued with Dorados, Dolphins, Dandelions, and Daybreaks, which came to be called D-Machines, all running (mostly) the same software.  They were a marvel for their day, and had all of the components of today's windowing PCs from Apple and Microsoft, but years earlier. The story of how the Star came to be and how Xerox came to abandon it is a complex one, and like the system itself, the full story is distributed across many obscure places that are not entirely consistent with each other.

But I think that the big picture reasons for its failure get lost in the soap opera details, and are worth a few words.  Obviously, Star had to be released too soon for its technology. Many of the reasons for its lack of broad adoption can be traced to the speed of its underlying electronics; and much of the architectural and usability weirdness of the various models of computer in its history can be traced to attempts to compensate for this basic problem.  Fifteen years later, Apple introduced the Macintosh, with almost the same capabilities, but with a commodity microprocessor CPU instead of custom designs made from bit-slice processor elements, at a tenth the price.  The Star had died out by then, but the Mac continues on to this day.

What kicked the Mac over the top into the realm of success was its developer ecosystem.  Technically, the Macintosh and Star developer models were very similar.  In the early days of the Mac, it wasn't possible to use it for development of its own Mac software -- developers had to use the substantially more expensive and powerful Lisa, and then test and distribute their applications on a separate Macintosh unit.  This was the same process that had been used for the Star, where developers used a Mesa development environment, and then deployed the results to the Star environment.

The difference was that there were already a lot of Apple II developers who were excited to move up to the new and awesome Lisa system.   I was a grad student when the Lisa was released, and one of my friends got one -- he must have spent a substantial part of his meager life savings on it.  The business and research communities that were available to Xerox in its own time could not match that kind of commitment.

The community that developed the Star was small and exclusive. I happened to be attached to a PARC-adjacent computing community in the mid 1970s and there were rumors of amazing things going on over there, but exactly what was never clear. It was impossible to tell from the outside, but much later it emerged that the PARC computing community was internally even more fragmented than it appeared to be This turned out to be typical for an entire stream of computer research history, but the phenomenon was particularly acute at PARC, and its effects showed up in fundamental aspects of the D-machine architecture.

Notably, there wasn't really a "D-machine architecture". There were high-level visions of what might be possible in a world where every person had their own computer beside their desk, but everyone had a different version of that vision. PARC had been staffed with some of the most brilliant, creative, and independent computer researchers to be found, and they created Promethean hardware frameworks that could be elaborated into whatever their application vision required.

The result was that a given D-machine could become one of four different computers, depending on who was using it at any given time. A relatively tame instance provided for programming in the BCPL, Mesa, and Cedar languages under the control of a command line interface in its windowed development environment, Tajo. Starting the machine with a different microcode load would turn it into an office workstation providing a suite of word processing and publishing tools with the now-familiar windows, icons and folders metaphors, but without software development ability. Other microcode created a  Lisp Machine running Interlisp-D, or a dedicated Smalltalk machine. The microcode and even the device drivers for each environment were unique and incompatible and the user communities for each one didn't seem to talk to each other, and their writings rarely even acknowledge their counterparts' existence.

A D-machine gave its user a vast amount of control and flexibility -- it could become whatever you could imagine, if only you had the talent, skills, and time to build it before your tenure at the lab expired and you had to go somewhere else. Collecting brilliant people and giving them access to the most advanced tools and letting them work on whatever they think they can be the most productive at is a standard strategy for top tier research labs, and it often produces marvelous results. PARC produced many marvelous things. However, creativity is unpredictable, and unpredictability is largely unworkable as an element of business strategy.

Xerox management turned out to be unable to solve the problem of herding its houseful of cats in a coherent direction that led to business success, and their inability to settle on a common machine language that would be tolerated by all their diverse projects is emblematic of their failure to achieve focus. Each external developer community was too small to provide Xerox with the volunteer support that it needed in order to attain a critical mass that contributed to business innovation in the way that DECUS or SHARE did for DEC and IBM, or that Apple enjoyed in a less organized way, instead of draining energy and R&D funds.  Whether that critical mass was possible given the other limitations of the technology is impossible to say, but there's no evidence that Xerox or PARC management had any notion that customers could be creative contributors to a product in a way beyond passive consumption.  It would take another two or three technology cycles before the idea of a "platform" became a common sense aspect of business strategy.

Two great lies in financial policy

It's not a lie if everyone believes it, is it?

I'm still not sure which of these should be first.  They've both been distorting financial policies for decades.  They have so much history, that about all I can do here is name them.  If you can break out of the reality distortion field that sustains them, the fact that they're lies becomes self-evident.  It's tempting to call them "myths", because for many people they're articles of faith that must not be questioned.  But experts know, or should know, that they're empirical claims that can be falsified. And they have been.  Here's another try. An expanded version of this note is at Medium.

Lie No. 1: The proper rate of inflation is 2% annually.

Economists repeat this so often, it must be true. But historians at the New York Times and elsewhere have traced the history of the number back to a guy in New Zealand (an important guy in NZ at the time) who admitted that he just picked it because it seemed intuitively reasonable.  There's no theory to support this number. Two percent seems reasonable if you don't think too hard, so everyone goes with it.

If you look just a little bit deeper than "what everybody who's important is saying", you'll find that the US Federal Reserve Act, as amended in 1977, requires price stability, i.e. an inflation rate of 0%, not 2%.  Then you look at prices in the US, which have been controlled by the Federal Reserve system's policies, and see that the dollar has lost about 80% of its value since then.  That doesn't look like stability to me.

Lie No. 2: Public companies are required to maximize their short term investor returns.

This lie has been debunked many times, but tenaciously persists.  People complain about it all the time, but the alternative never seems to sink in.  I don't know why the competing soundbite is so slippery. Here's the truth: All companies are required to do whatever their owners specify (including public companies). If the owners want to give its assets away to charity, or run the company into the ground for political or competitive reasons, that's their prerogative.

Milton Friedman is most famously associated with the "shareholder value" dictum. In the most generous reading, this lie is predicated on a misunderstanding of how shareholders communicate with management.  If they can only communicate by buying or selling their shares, then the amount of information that owners can communicate to management is incredibly limited.  A purchase means "good work", and a sale means "you're doing something wrong".  That's it.  Exactly what is being done well or badly is impossible to communicate.

Yet anyone who's actually become an owner by purchasing stock knows that they have purchased more influence than this, both formally and informally. Shareholders choose members of a corporation's board of directors, who choose senior managers to execute their desires.  They also specifically influence company policies by voting on shareholder initiative statements.

Alas, in many corporations, management has effective control of the board rather than vice versa. Board members are chosen by the CEO and then submissively ratified by the broader population of shareholders.

In addition, a vicious cycle of greed exists where sociopathic individuals whose goal is to accumulate more money regardless of the cost to others and to the society that enables their greed, consequently accumulate more financial power to acquire even more money even more rapidly.

Governments attempt to limit the destruction that this cycle causes by anti-monopoly laws and regulatory agencies and regulations intended to ensure that effective markets exist where multitudes of interests can contend and mutually damp each others' excesses.

In heavily financialized modern economies, most of the shares of public companies are owned by huge funds that are themselves public companies, and this distancing of ownership makes communication of corporate goals other than making more profit very difficult. 

Getting large, bureaucratic organizations to change their behavior requires organized efforts, slogans and acronyms. One set of important not-specifically-profit oriented goals has become known as ESG, for Environmental, Social, and Governance oriented investing.  A goal complex called DEI, for Diversity, Equity, and Inclusion, is following ESG as an investment strategy that looks beyond mere short term profit. Additional ways for companies to explicitly step away from the "profit is everything" philosophy are to become incorporated as a "benefit corporation" or certified as "B Corporation".  Curiously, as a non-profit organization B Lab, the company that administers B Corporation certification, is not itself certified as one.

So with organizations tracking and publicizing these measures the market should see how organizing for social benefit gives greater returns, and self-correct.  Easy, right?  Not if politicians get in the way. The conquest of the profit motive by social goals in both left and right wing politics will be the stuff of history for many years to come.