The nature of power, the stories people tell about us, and the stories we tell ourselves is a current throughline within seemingly everything I’ve been watching lately.

Dune Part 2. Loved it, IMAX recommended. The sheer scale of story isn’t just something exposited, you feel the crushing weight of it throughout. The film is trimmed to the point where some detail is skipped over, but the upside is the story never loses momentum. The underlying political economy remains relevant at all times.

Shogun feels true to the source material. Beautifully rendered. The possibility of power, and in turn the taking of power from others, can force your hand. How many coups are forced by the expectation of a coup? Funny how a world can hinge on an inelastic resource, be it a planet’s worth of hallucinogen or a single sailor’s navigational human capital.

The Great. Funny, decadent, ludicrous, and pitch dark at different times, I see a shocking amount of my own worldview in the writing. The alchemy of fear and self-interest swirling around power makes for an incredible comedic substrate. I recommend this to anyone who will listen and I’m probably going to write more about it.

The Kid Detective. How did none of you tell me about this movie? Much like Confess Fletch, it is an absolute gem that fell through the cracks of a theater-less pandemic. A dark comedy about the tragedy of being labeled a prodigy and how that can short-circuit a young person’s development, set within a town short-circuited by a crime. It’s not a happy movie, so don’t expect a happy ending, but it felt honest at every step.

Alex Burns recapped a conference session about the market for PhD students in History. It was, predictably, rather despondent as is the nature of the job market for all graduate students in history, but doubly so for those outside the absolutely most elite 3 to 5 schools. The whole thread tells the story of graduate education in history, and the broader humanities, with sincerity and empathy.

Now, if I were a respectable economist, I would note that discussed plans to increase the supply of graduate student labor in a market with already paper thin demand is most certainly not the answer. Economists rarely pass up the opportunity to roll their eyes at any academic failing to understand supply and demand, but fortunately Christopher Jones (a proper historian) already made the appropriate observation:

What caught my eye, however, was the noted recommendation that faculty stop identifying scholarship in their field as a viable career altogether:

This makes my blood run cold for a number of reasons. First, its a trap whose bait is appealing to those students who are simultaneously the most earnest and most insecure. Unsure of what life will be like after college but know in your heart that you loved your classes in rhetoric or 16th century literature? Then why not make the noble decision to forsake the material world for a life of the mind? That’s exactly the kind of trap that makes for the pompous 23-year olds who turn into angry and despondent 30 year olds.

Perhaps worse, however, is the forsaking of an entire discipline that once held the mantle of profession and might now resign itselft to the standing of a hobby. I’m a STEM-y, arrogant economist who consumes very nearly no pre-19th century literature but that doesn’t mean I don’t think the deepest understanding of the foundations of a culture, any culture, doesn’t have profound insight to offer future generations. There is value there, the kind that might even qualify as a public good, whose provision we might want to collectively support, if we so chose.

It’s especially frustrating, however, because I can’t help but think the answer is right in front of them. It just happens to be nearly the inverse of the first suggested policy. History and the humanities need to reduce the supply of graduate students. That’s all there is to it. Yes, research and teaching will be more slower and more arduous without as many graduate assistants. It’s a tough break, but it sure as hell seems a more modest price to pay than the abandonment of scholarly training as something that leads to a viable career. I’d also like to very much hope that it would ease the conscience of faculty taking on graduate students as assistants, then thesis advisees, knowing that 5 years of laborious apprenticeship isn’t destined from the beginning to end in tears. You’ll have fewer graduate students, but hey, at least now you’ll be able to look them in the eye.

There’s a term in urban development: shrinking to greatness. A city can in fact shrink in population and still come out the other side viable, even potentially stronger than ever. That’s the story of Pittsburgh. Embrace what you are, not what you used to be or wished you were. There are a lot of disciplines and subdiscplines that are going to destroy themselves trying to become the STEM fields they wished they were or the recreate past golden ages of dubious veracity. But there will be some, across fields or within single universities, who will recharacterize themselves as custodians and curators of scholarship whose demand may have shrunken, at least for the moment, but whose contributions can carry forward. If that means at a slower pace or smaller scale, so be it. Better to embrace what you are than recruit the naive as kindling for a bonfire lit by arrogance and denial.

At Ave Maria University, we have an open economics faculty position. Indeed, it’s late in the job market and we haven’t settled a match. That’s what accounts for my late post. I interviewed someone today when I otherwise would have been grading. So, I spent my evening writing feedback on papers (pleading for greater concision).

We are a small department at a Catholic liberal arts school. When staffed, we employ 3 full time Econ faculty plus 1 or 2 adjuncts. We’re primarily a teaching university, teaching 3-class loads each semester. The students are great people. They have better moral fiber than I did at their age and the Econ majors tend to be smarter and more capable than I was at their age.

The university is located in Ave Maria, Florida which is a small town near Naples, the very wealthy destination of snowbirds and retirees. Most faculty live near the university, send their kids to the nearby private school, and attend the same masses. There is a lot of community here.

We’re happy to take economists of almost any specialization. A focus on micro or stats or data analysis would be a plus. The link to apply is below. I’d be thrilled to learn that this is how we met.

https://workforcenow.adp.com/mascsr/default/mdf/recruitment/recruitment.html?cid=70cb71c1-96f8-4956-8cce-ce625b0b2943&ccId=19000101_000001&type=JS&lang=en_US&jobId=466997

There are two ways to increase profits or available funds: grow revenues or reduce costs. We typically laud the creative teams that identify paths to greater revenues while, at best, tolerating those in charge of tightening belts. Given the tones in which we speak of austerity, there’s the thought that perhaps those at it’s vanguard are underrated (and they probably are, at least relatively). On the other hand, we often find ourselves operating within an economy of credit and blame. Credit for revenue gains tends to spread to the whole team, while credit for profits attributable to spending cuts specifically accrue to the management imposing those cuts. In such a model, spending cuts would be overemphasized as a profit-maximizing strategy. Growth can also be overemphasized of course – venture capital has come to exist as an institution that seems to only be interested in “home run” investment outcomes, likely at the expense of simply supernormal returns. We could keep pursuing this line of thinking, but I’m not really interested in adjudicating where austerity or growth is overrated. I think there is a broader concern to be considered in the growth/austerity strategy dichotomy. Within such a model of optimal decision-making there is an unstated, but critical, assumption that the relevent set of revenues and costs is perfectly fungible, and in turn comparable, across all contexts.

I think of this phenomena as the Unified Theory of Excel (UTE), an operating principle that can take over decision-making within a company or institution. The UTE carries the false promise that all contexts across an operating entity can be reduced to columns in a spreadsheet and, in turn, a decision made by netting out the effect of changes to those columns. Now, If you think that I, your friendly neighborhood economist, am about to make woo-woo claims deriding the information held within costs and revenues, get used to disappointment. My concern lies in the arrogance, sometimes negligence, in the assumption that numerically identical changes in costs and revenues across different contexts are comparable. It’s not that the information within the columns is bogus or irrelevant, but rather that the lack for context characterizing the relationships between the columns undermines any hope for knowledge to be produced. Data are just meaningless numbers absent a model to characterize the relationships between the numbers. And that’s all a model is – an attempt to place the data in the appropriate context.

Complaints from those on ground about clueless management and soulless beancounters are, essentially, complaints that they are operating without a model. Cutting $100k from a marketing budget is not the same thing as cutting $100k on jet engine inspections and quality control. The world of possible outcomes from marketing cuts might include between $25k to $50k less in sales revenue, a large drop the worst attributable failure possible. In contrast, $100k quality control cuts will result in $100k in increased profits in 99% of possible outcomes, but of course there’s also a 1% chance that 10,000 people die in a fiery blaze, billions are lost in lawsuits, and the company ceases to exist. To be clear, I am fully aware of the resources that companies invest in projecting risk from decisions. Rather, the point is to illustrate the importance of context and the dangers of treating all numbers on a ledger as comparable and complete.

The Unified Theory of Excel is the belief that everything is fungible and can be abstracted to a spreadsheet absent any context or model. This belief in universal business fungibility is especially alluring given that the most recent wave of “people who got rich off of low-hanging fruit” were finance folks who observed the fungibility of risk across debt instruments. This false fungibility ignored the dangers of stripping numbers of context, which in the case of mortgage debt instruments included the relationship of ledgers across markets and higher statistical moments i.e. tail risk. Economic theory is built on abstraction, but abstraction has the fun property of being useful until it is disastrous. It’s the last step that kills you. Or creates a financial crisis. Or produces a jet where those 1% events keep happening.

What I am observing, in the news and broader conversation, is a frustration with management that I think is often being misinterpreted as “frustration with business” but I think is more correctly viewed as “frustration with business done poorly” or, perhaps more precisely, “business done with the wrong model”. Writers, actors, and film crews are frustrated with management operating with models that have been outdated for at least a decade. Journalists are losing their minds dealing with publishers who can’t keep outlets afloat and make payroll on time because an underlying model appears to be absent entirely. If this was purely about competing interests then the answer would, in theory, be available in competitive markets or at the collective bargaining table. But something seems off. It I didn’t know better, I’d be looking for a broad inefficiency, some sort of negative technology shock. An investment or commitment to operating in a contextual vacuum.

The thing about MBAs is they are generalists by training who often, by dint of their advanced credentialing, sometimes think of themselves as specialists. Their speciality being “business” carries with it an implied concept that business can be reduced to the universal application of their training and expertise, both of which have increasingly come to be…well…Excel. Excel is many things, but it is not a model (or at least not a very good one). Neither is “business”, for that matter. A spreadsheet supporting a pivot table embedded in a power point slide deck is something that you can carry from job to job, contract to contract. A 73kb hammer you carry in a world of nails waiting to be enumerated on your LinkedIn. It can accomplish tasks, present outcomes, but it offers no more context than a three-ring binder. It’s a model that says that everything is the same, everything is fungible. That the world can be reduced to mathematics no more complicated than 4th grade arithmetic. The sort of simple answer to a complex problem that HL Mencken warned us of.

One of my grad school classmates had a turn of phrase that I’ve grown to appreciate: “Hippy Hayekians”. These were folks who favored free markets not because business people were geniuses or heros, or because goverment was inherently evil, but because good decision-making comes down to the tacit knowledge that only comes from being in and of something, on the ground, embedded in it day to day. I’m by no means an Austrian economist, and my friend would never have put it this way, but I’m increasingly of the view that good management often does in fact come down to “vibes”. If, of course, by “good management” you mean a holistic understanding of the entire enterprise, including not just ledgers, but also risks, ambitions, culture, customers, and constraints. And by “vibes” you mean the tacit knowledge held and communicated by every single human being within a firm. Perhaps the occasional dog or cat.

I’m a data-driven guy down to my bones. Whether its criminal justice policy or how to produce a successful new brand of toothpaste, the best possible answer is in the data. But interpreting data is impossible without context, without a model. So maybe this whole post is a warning to be careful of anyone, be they managers, consultants, or management consultants, offering advice without a model.

Memes communicate a lot of information, yet they are rarely preserved and explained.

It is February 2024. A friend of mine who works in tech just posted a fleet of funny memes about his job.

I have written a research paper and a policy paper about job selection into tech.

Research paper: “Willingness to be Paid: Who Trains for Tech Jobs?“

I found that enjoyment or subjective preferences are underrated in the policy literature on the skills gap and promoting STEM in America. In a presentation in the Spring of ’23, I speculated that ChatGPT or other AI-assisted coding tools would make coding less tedious and therefore more fun.

I observe in this set of memes (posted in February 2024) that ChatGPT is already embedded in coding life, and yet it does not feel like anything fundamental has changed. Workers still Google their own way to solutions (although surely that has diminished somewhat due to LLMs). The work still feels hard and the workers still feel undervalued.

With my interest in personal finance, the headline

Robert Kiyosaki, ‘Rich Dad Poor Dad’ Author, Says, ‘I Am a Billionaire in Debt’ — And Calls Dave Ramsey An Idiot For Encouraging People To Live Debt-Free

got my attention. I happen to know many people who have been helped by Dave Ramsey‘s sensible courses and books on managing personal finances. But I don’t know a single person who has gotten rich by following Kiyosaki’s advice. So, I decided to do a little fact checking here.

Richard Kiyosaki published his financial self-help book Rich Dad Poor Dad in 1997. The book purports to be non-fiction, and dispenses financial advice through a supposed autobiographical narrative which contrasts his well-educated, hard-working but not-rich father (“poor dad”) with the father of his next-door neighbor Mike. Mike’s father (“rich dad”) was an eight-grade dropout who owned “convenient stores, restaurants, and a construction company. “

According to the narrative, Kiyosaki learned financial business secrets from this rich dad, which Kiyosaki applied to quickly build a vast real estate empire, using the magic of borrowed money.
Rich Dad Poor Dad became a runaway success, selling over 32 million copies, and remaining on the New York Times best seller list for over six years. Kiyosaki has parlayed its success into a series of further books and related products. Kiyosaki’s narrative has fired the imaginations of millions, and made him rich through the sales of his books and other products.

I read his book back around 2000, and came away with mixed impressions. On the one hand, there was sensible advice to put your resources into money-generating assets rather than frittering it away on consumer goods. The narrative of how easy it is to make big money in rental real estate was alluring, and motivated me to delve further into the subject. On the other hand, the book was pretty short on specifics of how to actually do this, beyond recommending expensive courses offered by Mr. Kiyosaki. It seemed too good to be true, but hey, how could I argue with such apparent success?

It turns out that that skeptical intuition of mine was justified: the promises offered in Rich Dad Poor Dad are too good to be true, and in fact the whole narrative of the book appears to have been made up in order to appeal to gullible readers.

Various people have probed into the Kiyosaki story. The most extensive treatment I know of is “John T. Reed’s analysis of Robert T. Kiyosaki’s book Rich Dad, Poor Dad”, but see also “ Shocking Revelation: Kiyosaki’s “Rich Dad” Is Not Real, but a Myth Like Harry Potter “, by KSCHANG at Tough Nickel, and others.

As best anybody can tell, there never was this “rich dad” character as described by Kiyosaki. Also, there’s no evidence that Kiyosaki actually made significant money by real estate dealings, prior to making millions of dollars with his book sales (and presumably putting some of that into real estate.)

As a person who values personal integrity, I tend to be peeved when authors or screenwriters present a book or a movie as fact, when key parts of it are actually fictional.  The usual “Based on a true story“ disclaimer doesn’t cut it, since readers/viewers can’t help coming away with the impression that this is what happened, when really it didn’t (Think: Roots, A Beautiful Mind, etc., etc.).

So the dishonesty at the core of Rich Dad Poor Dad annoys me. What is more significant is that much of the advice is actually counterproductive, harmful, or even illegal. For instance, Kiyosaki recommends trading stocks based on private tips from friends in corporations; this is called “insider trading”, and people like Martha Stewart have gone to jail in connection with it. He also tells of how he can back out of contracts by inserting a clause “subject to the approval of my partner”, where said partner was actually his cat. That is called “fraud”.

Richard Emert at The Motley Fool opines, “Kiyosaki’s material is almost completely devoid of specific financial advice. Further, his material on making money in real estate appears to be little more than repackaged hype from the “no money down” real estate hucksters of the late ’80s.”
In deference to his exhaustive investigation, I’ll give John Reed the last words here (tell us how you really feel, John):

Rich Dad, Poor Dad is one of the dumbest financial advice books I have ever read. It contains many factual errors and numerous extremely unlikely accounts of events that supposedly occurred.

Kiyosaki is a salesman and a motivational speaker. He has no financial expertise and won’t disclose his supposed real estate or other investment success.

Rich Dad, Poor Dad contains much wrong advice, much bad advice, some dangerous advice, and virtually no good advice.

[emphases in the original]

…the book goes on to deliver a pack of lies that make getting rich seem much easier than it really is and make education sound much less valuable than it really is. Basically, people want to get rich quick without effort or risk. Kiyosaki is just the latest in a long line of con men who pander to that fantasy.

… [But] to members of Kiyosaki’s cult, it matters not how many false or probably-false statements I find in Kiyosaki’s writings. They just like the guy. Personality is an appropriate criterion for selecting someone to hang around with. But it is a highly inappropriate criterion for evaluating Kiyosaki’s advice, because he’s not going to let you hang around with him and your family’s finances are serious business.

Darthmouth men’s basketball took the next step in forming the first union of NCAA athletes. What does that mean? First, some background. The NCAA is divided into Division 1, 2, and 3 schools. Division 1 schools earns roughly $16 billion per year, the lion share of the revenue. The organizing institution, the NCAA earns about a $1 billion per year, and while their website reports that they return 75% of that to member schools, $250 million dollars per year is nothing to sneeze at for doing little more than managing and enforcing a cartel. Until 2 years ago, the NCAA prohibited any compensation for athletes beyond scholarships, room, and board. Now they can earn incomes from their image rights. In the Ivy League, athletes aren’t even allowed to receive scholarships (though I’ve been told by many personal friends that financial aid packages are unusually large for athletic recruits).

Cards on the table, I’ve long felt this was the most egregious abuse of labor currently active in our country. We scream at each other over whether the minimum wage should be higher while ignoring a group of workers upon whom a cartel is enforcing a maximum pecuniary wage of zero? Is there a side of the political spectrum currently arguing for ceilings on wages for anyone? How bans on athlete compensation survived this long is beyond me, though when left to speculate upon it my mind inevitably wanders to our worst cultural sins.

Let’s assume that the union eventually comes to be. Let’s further assume that the unions of teams and sports federate, eventually forming an umbrella union of all NCAA athletes across all divisions and sports. What will happen? When economists talk about unions, they typically focus on two channels through which they can have positive effects for their members. The first is they can close shop, restricting the supply of labor, driving up wages. This is Econ 101, not a lot of controversy. The second is that they can solve a collective action problem, enabling cooperation amoung members when bargaining for wages against employers. The size of this benefit depends largely on how organized employers are. The more cartelized employers, the more effectively they can collude, the larger the expected gain from collective action on behalf of labor. As such, we can expect the largest positive effect for labor when the union is negotiating against a monopsonistic employer (i.e. the employer constitutes the entire labor market) or a perfectly organized cartel of employers.

As such, when economists argue about (private sector) unions, any disagreement typically comes down to an empirical question: how concentrated is the labor market? How much power does the employer have in the labor market? With long-standing unions, political economy and bigger picture policy cost come into play, but we let’s put that aside for now (NB: we won’t even touch public sector unions. Those are a completely different bag).

What makes the NCAA context interesting is that there is no debate as to whether the NCAA is a cartel or sufficiently well-organized to impose significant costs on labor. It’s a >$16 billion dollar industry and the mission-critical employees haven’t been getting paid any pecuniary income at all. My suspicion is that even amongst the most union critical economists you could fine, most would agree that, conditional on the continuing existence of the NCAA, athletes would benefit from unionizing.

Ok, great, but what’s going to happen?

1. Athletes will incrementally unionize.
2. Compensation will increase, even beyond Name, Image, and Licensing (NIL) compensation.
3. Scholarships will appear, in some form, at Ivy League schools.
4. Sports will remain nearly everywhere, but I expect some schools will find that costs now exceed benefits, exiting Division 1 and 2.
5. The model of compensating with “exposure” to professional scouts will continue to dissipate. You don’t need to be on national television anymore to have a scouting profile. Data and YouTube have changed the value-add of playing for a top 10 versus top 200 school, which means that compensation will become an even more critical deciding factor in recruitment.
6. Athletes will frequently exit college with savings but also having already peaked in terms of lifetime yearly earnings. Which is fine – there is no shame in never making $200k/year again.
7. The competive advantage of the the top schools in “big roster” sports i.e. football will grow. This will make already lopsided football matchups less tenable and, quite frankly, too dangerous. The formation of a collegiate football “super conference” is inevitable. It will make big money and so will the athletes. The NFL will have a true minor league, albeit one with a rabid fan base. It’s the rare win-win-win.
8. Alumni donations will create “upstart schools” in sports overnight. A single $5 million dollar donation can make you the best gymnastics program in the country overnight. University hospitals have long been funded by saving the lives of very grateful, very rich people. Don’t be surprised when a walk-on who wrestled at 149 pounds and invented the next killer app writes a check that creates a dynasty.
9. Coaches salaries will decline, often enormously. Head coach salaries will recover to some degree, assistant coach salaries will not. Coaches will become the labor class being most paid in “exposure” and “opportunity”.
10. My guess is the only losers in this entire story will be a) Division 1 football and basketball coaches and b) officials at the NCAA. I will shed no tears for them.
11. Enterprising athletes will start making money on Twitch playing the video game version of their sports, possibly themselves, against fans on their nights off. It will be awesome until 19 year olds start getting canceled for saying bad things in the heat of competitive video game competition.
12. Athletes will negotiate more favorable practice and travel schedules. Graduation rates will go up.
13. Schools won’t want to pay salaries for unused players. Red shirt rates will go down.
14. Athlete influencers. There’s going to be so many college athlete influencers.

Please, no selfies and livestreams in my class. Please. I’m just trying to get through my day.

I had some fun with my favorite editor Christy Horpedahl.

WOULD ADAM SMITH TELL TAYLOR SWIFT TO ATTEND THE SUPER BOWL?

Have you been told that economists only care about money? If anyone would tell Taylor Swift to focus on her own career, you might think it would be the most famous economist of all, Adam Smith. But AdamSmithWorks fans already know that Adam Smith was concerned with the whole person. So, would Adam Smith advise Taylor Swift to rush back to America after an exhausting concert just to cheer on a man in a football game? 

Click the link and find out!