Inflation-Adjusted Wages Have Been Rising Since June 2022

Jeremy Horpedahl1 Comment

Back in May 2022, I wrote about the very bad picture for inflation-adjusted wages in the US. While they were still slightly above pre-pandemic levels, wages had been falling consistently since the beginning of 2021.

But since then, we’ve got some better news. The chart below shows the data (note: I’m using wages for private production and non-supervisory workers here, rather than for all private workers in the May post).

While the overall inflation picture still looks bad, with 7.1% annual inflation in the latest report, we also see that in the past 5 months wage growth has exceeded CPI growth. It’s also been true compared with the PCE price index for the past 4 available months (November PCE data won’t be available until next Friday). Inflation has cooled slightly in the past few months, while wages have continued to grow.

This all means that real (inflation-adjusted) average wages in the US have been rising consistently since June 2022. Finally, some good news!

Reckless Management Led to BlockFi Crypto Bankruptcy

Scott Buchanan2 Comments

Since my nontrivial deposits at the cryptocurrency lending firm BlockFi have been blocked (maybe forever) from withdrawal, I keep an eye on news from that front. My main source of information has been missives from BlockFi itself, in which management portrays itself as being very careful with customer funds; it was only the shocking, unforeseeable collapse of the FTX exchange that forced the otherwise sober and responsible BlockFi into its recent bankruptcy. I have believed that view of things, since that is all I knew.

However, Emily Mason at Forbes has poked around behind the scenes, including finding insiders willing to talk (off the record) about less-savory doings within BlockFi. The title of her recent article, BlockFi Employees Warned Of Credit Risks, But Say Executives Dismissed Them, pretty much says it all. The article starts out:

In its bankruptcy filing last week, New Jersey-based BlockFi attempted to paint itself as a responsible lender hit by plummeting crypto prices and the collapse of crypto brokerage FTX and its affiliated trading firm, Alameda.

That is the view I have held up till now. However, Mason then goes on to note:

 But a closer look at the company’s history reveals that its vulnerabilities likely began much earlier with missteps in risk management, including loosened lending standards, a highly concentrated pool of borrowers and unsustainable trading activity.

To keep this blog post short, I will just paste in a few excerpts where she fleshes out her case:

While the company regularly touted a sophisticated risk management team, current and former employees indicate in interviews that risk professionals were dismissed by executives preoccupied with delivering growth to investors. As early as 2020, employees were discouraged from describing risks in written internal communications to avoid liability, a former employee states.

Ouch. Not a good sign.

Until August 2021, BlockFi advertised that loans were typically over-collateralized. But large potential borrowers were often unwilling to meet those requirements, a cease and desist order brought by the Securities and Exchange Commission against BlockFi in February states. The availability of uncollateralized capital from competing companies like Voyager created stiff competition in the lending field.

Under pressure to continue growing and delivering yields, BlockFi began lending to these parties with less collateral than publicly stated without informing customers on the amount of risk involved with interest accounts, according to the SEC order which resulted in a $100 million fine for the company. As a result, BlockFi paused access to its interest accounts in the U.S.

Wait, that is MY money they were messing with. Now I am really annoyed.

In addition to lowering its collateral requirements, BlockFi’s due diligence process had flaws, former borrowers say. Available credit for borrowers was decided based on their assets, but BlockFi and other lenders failed to investigate both the size and quality of potential borrowers’ holdings. Like Voyager and other crypto lenders, BlockFi accepted unaudited balance sheets from hedge funds and proprietary trading firms former borrowers say, leaving room for manipulation on the borrower side.

In the due diligence process, lenders like BlockFi and Voyager did not examine whether borrowers’ balance sheet assets were denominated in dollars or less liquid tokens like FTX-issued FTT.

… The revelation that Alameda’s balance sheet was mostly FTT tokens was the news that set off the unraveling of both Alameda and FTX and triggered contagion effects across the industry. In early November, Alameda defaulted on $680 million in loan obligations to BlockFi, according to the bankruptcy filing.

Some BlockFi employees reportedly warned of the shakiness of the parties to whom clients’ finds were being loaned. Management dismissed these concerns because the loans were “collateralized”,  but as noted above, the extent of that collateral was *not* what we clients were told:

… An internal team at BlockFi also raised concerns that the borrower pool was too concentrated among a pool of crypto whales, including mega hedge funds Three Arrows Capital and Alameda, another former employee states. Management responded that the loans were collateralized, according to the employee.

This is a very common scenario in finance: In search of profits, management  cuts corners and takes more risks with client funds than they were telling the clients. Maybe Sam Bankman-Fried will up with cell-mates from BlockFi.

Because BlockFi survived the Luna/Terra collapse some months ago and because I believed the steady stream of reassuring pronouncements from BlockFi management, I only withdrew a third of my funds back in the summer. But as it turns out, that withdrawal was apparently bankrolled by a big loan to BlockFi from Bankman-Fried’s FTX; but FTX is now caput.  So the odds of my ever seeing the rest of my funds are slim indeed:

In BlockFi’s bankruptcy filing and in public statements made by its CEO, Zac Prince, the company points to its survival through the collapse of the Terra/Luna ecosystem and subsequent shuttering of Three Arrows Capital as evidence of strong management. But that endurance four months ago was made possible through a $400 million credit line from now-defunct FTX, which allowed the firm to meet panicked withdrawal requests from depositors. When FTX folded in early November, BlockFi lost its lending back stop and could no longer meet fresh waves of withdrawal requests.

One lesson learned: If there is a reasonable chance of a panic, it can pay to be the first to panic, not the last.

Present your work earlier

mdmakowsky2 Comments

I presented some new research three times in the last six weeks. There’s nothing new about that save the fact that we haven’t finished writing the paper. I can’t overstate how much I’ve learned about what our paper is and, more importantly, what it isn’t.

I can’t speak for you, fellow writer/scholar/waffle enthusiast, but I have a tendency to lose track of what we’ve actually, specifically, learned from the research in question when it comes time to present the research to the world. Instead, I get wrapped up in why we started the project in question. A haze of almost scholarly nostalgia can obscure the communicating of the contribution being made.

Often, for me, research is motivated by a discomfort I feel with how a question is being asked or answered in the literature, or often, not being asked at all. That sort of righteous indignation is great for fueling the sense of self-importance necessary for starting a 3-5 year research project, but it can be inhibitive to communicating the actual contribution produced by those years of work.

Sure there were the standard identification quibbles from audiences. And yes, I felt the groping reach of arms trying to pull me into their more narrowly siloed research areas. This isn’t labor, it’s IO. It’s not monopsony, it’s imperfect competition. Why don’t you talk more about policy? The history? That’s useful, it will help you refine your analysis and keep it up to date, but it’s not the kind of commentary that can fundamentally change how you write a paper.

What I’ve been able to observe, through these early presentations absent a draft, is the conversation the audience wants to have. Where there minds naturally take them without the structured guidance of a written draft. What our findings can and cannot convince them of.

What I’m learning isn’t how to convince them of the grand thesis that initially motivated the work. What I’m learning is the conversation our work can generate and, within that conversation how I can persuade them to take just a few steps down a path I want to see explored in the field going forward.

Present your work early. You’ll be amazed how much the audience can teach you about a paper you haven’t written yet.

Slow Adjustment in Tech Labor for CGO Research

Joy Buchanan2 Comments

The CGO published a policy paper I wrote with Henry Kronk.

The Slow Adjustment in Tech Labor: Why Do High-Paying Tech Jobs Go Unfilled?

Executive Summary

The United States technology industry continues to struggle to recruit new talent. According to the US Bureau of Labor Statistics, the number of people employed in technology is not increasing quickly. 

Tech jobs pay well and don’t have the drawbacks of some other in-demand jobs, such as the travel schedule of a truck driver or the physically taxing labor required in oil fields.

Tech jobs are sometimes touted as a guarantee of having a comfortable and rewarding career, but the reality is not that simple.

Economics suggests that high wages would eliminate labor shortages, but that’s not the case in tech work. Why?

In this paper, authors Joy Buchanan and Henry Kronk propose a set of factors that have been overlooked and apply broadly to the tech sector. 

Individuals with high-status tech jobs report burnout, anxiety, depression, and other mental health issues at higher rates than the general population. They also have to deal with the constant threat of becoming obsolete. Because technology changes so quickly, they must constantly work to update their skills in order to remain competitive.  

The authors offer several recommendations for tech companies, educators, and policymakers:

  • Political and community leaders can provide more accurate messaging such as communicating clearer expectations about the difficulties of entering the tech workforce. 
  • The tech industry could benefit from improvements in computer education. The authors cite a need for more pre-college exposure to computer occupations as well as a need to add communication skills to computer science curriculums.
  • Teachers, parents, and tech companies can all find ways to inform young people at an age-appropriate level about opportunities. Computer science is abstract and hard to understand. Young people who have some exposure to computer science through a class or camp are more likely to become CS majors in college. 
  • Company leaders can improve their recruitment and development strategies to reflect the labor market realities including paying enough to compensate employees for the mental challenges of demanding technical work and alleviating their own talent shortages by investing in training and education. 
  • Tech companies may be able to attract more women and minorities by improving their scheduling and management practices.

Henry and I examined public data and the existing literature to get a better understanding of the current state of knowledge on this issue. I hope our paper can be helpful, however we partly just highlight how many questions still exist about tech and talent.

My recent paper in Labour Economics, Willingness to be Paid: Who Trains for Tech Jobs?, was designed to add new data to address these questions.

Inflation, Information, & Logic

Zachary BartschLeave a comment

Most economists know that the CPI is overestimated and therefore prefer the PCE price index. However, monthly CPI data is consistently released before PCE data for a given month. One would think that they move in the same direction and be highly correlated. Indeed, in the past five years, the correlation is 0.96. Therefore, it stands to reason that the there is less new relevant information on the PCE release dates than on the CPI release dates. Yes, CPI is biased, but it still contains some information about prices and it is known well prior to the more accurate PCE numbers.

Supply and Demand react to new information. Sometimes the new information changes our expectations about the future, and other times we learn that our beliefs about goods and assets were previously not quite right. So, with new relevant information comes new prices as people update their beliefs and expectations.

Let’s get financial.

Continue reading →

Sympathy for the Sauds

James Bailey1 Comment

I’ve always been confused by the US alliance with Saudi Arabia. Its a state with values abhorrent to many Americans, and it seems like we don’t get much practical value out of the alliance.

This essay on Saudi history, politics, and economics by Matt Lakeman makes the situation more comprehensible. I still don’t know that I want the alliance, but I can now see how so many US presidents have continued with it without necessarily being stupid, crazy, or corrupt. In short, they think that most of the realistic alternatives are worse. Some highlights:

Before starting this research, I had the same perception as Wood that the Saudi economy is essentially what he calls a “petrol-rentier state.” Basically, Saudi Arabia sits on top of a giant ocean of easily-accessed oil which they suck out of the ground and sell at enormous profit to prop up the rest of their extremely inefficient economy and buy the loyalty of their own people and foreign powers. Saudi Arabia is the wealthiest large state in the Middle East today by sheer virtue of geographic luck rather than any innovation or business acumen on the part of its people.

And after doing my research, all of the above is… basically true.

But all of that should also be true of Iran, Iraq, Venezuela, Libya, and a few other countries which are also situated on giant oceans of oil but are far poorer than Saudi Arabia.

Economically, Saudi Arabia deserves little credit for its success. Politically, Saudi Arabia deserves a tremendous amount of credit for enabling its economic success. 

Dealing with the resource curse is always challenging, and foreign ownership is an additional challenge. How did they manage it?

the Sauds struck a clever balance between being too aggressive and too placating of the foreigners operating their oil wells. If the Saudi state had been aggressive and tried to nationalize its oil quickly, Saudi Arabia could have ended up becoming another Venezuela or Iran with lots of external political pressure from hostile Western countries and a low-efficiency oil industry. But if they had nationalized too late, they would have ended up like a lot of African nations who have all their natural wealth siphoned away by foreigners.

Instead, the Sauds executed a patient, and most importantly, amicable assertion of power over Aramco, which did not become fully owned by Saudis until 1974. At the very start of Aramco, the company was entirely owned and operated by Americans aside from menial labor. However, the Saudi government inserted a clause into their contract with the corporation requiring the American oil men to train Saudi citizens for management and engineering jobs. The Americans held up their end of the bargain, and over time, more and more Saudis took over management and technical positions.

In addition to carefully negotiating the balance of power with various foreigners, the Sauds have done so with the religious establishment:

Though the monarch has absolute power, his authority is at least in part derived from Saudi Arabia’s Islamic religious establishment. The ulema (a group of the highest-ranking clerics) is officially integrated into the government, and plays an important role in legal matters. However, the religious establishment has slowly been marginalized by the monarchy over the last few decades, and has possibly been subjugated entirely since the reform era began five years ago.

Winning freedom of action has been a long road with many setbacks:

[King] Abdulaziz constantly had to reassure enraged Wahhabi clerics that he wasn’t selling out the Arab homeland to treacherous infidels. IIRC, it was some time in the 1920s that Abdulaziz had to publicly smash a telegraph to prove to the clerics that he wasn’t bewitched by infidel technology.

In late 1979, 400-500 extremist Sunni Saudis seized the Grand Mosque in Mecca (the holiest Islamic site on earth) and demanded the overthrow of the Saud dynasty in favor of a theocratic state meant to await an imminent apocalypse. They held on for two weeks while managing to fight off waves of Saudi police and military squads. Eventually, three French commandos flew to Mecca, converted to Islam in a hotel room, and led a successful assault to retake the Mosque. Over 100 men died on each side, with hundreds more wounded.

The Grand Mosque seizure was the final wake-up call for the Saud dynasty. Something drastic had to be done or their regime would likely be ground down under mounting internal and external pressure…. King Khalid led a social/religious/political reactionary revolution within Saudi Arabia to align with the Sunni extremists. Up until about four years ago, Saudi society was still gender segregated and enforced a largely literalist interpretation of Sharia, hence the array of bizarre and antiquated laws – gender segregation in public, requiring women to cover their faces, outlawing of non-Muslim religious buildings (there are a few Shia mosques), restrictions on foreign media, etc. Saudi Arabia was always conservative, but most of these draconian laws were only put into place in the 1980s. The Saud dynasty purposefully induced a reactionary legal regime and pulled Saudi Arabia further away from liberalism.

The charitable take on making an already oppressive regime even more oppressive is that the Sauds were trying to bend Saudi Arabia to the extremists so the country would not break. And by all accounts, it worked; the conservative Wahhabi clerics backed by the Saud dynasty placated a sizeable portion of the Sunni extremists inside and outside of Saudi Arabia, and they became a pool of support against the Shia and Baathists. Saudi Arabia was certainly made a worse country for its citizens, but that was the price to pay for averting civil war.

More recently, Crown Prince Salman has consolidated power to the point where he can make modernizing reforms that Wahhabis might have opposed, like allowing women to drive, allowing non-Muslim foreigners to to get tourist visas, allowing music concerts, et c. Lakeman obviously likes these reforms, but at the same time worries that the concentrated power that so far Salman has largely used to enact positive reforms could be abused going forward, and on a larger scale than murdering the occasional dissident.

Wood argues that a worst case scenario parallel to MBS is Syrian Dictator Bashar al-Assad. Like MBS, there were high hopes that Assad would be a liberal reformer when he took over Syria. After all, Assad had been living and working in the UK as an ophthalmologist with no political aspirations, and was known to be a fan of Phil Collins. He was called to the throne after the unexpected death of his older brother, and so the West hoped that this nerdy British doctor would bring upper-middle class liberal values to Syria. Instead, Assad became one of the worst dictators of the modern Middle East, probably second only to Saddam Hussein.

I recommend reading the whole thing, here I’m quoting relatively small parts of an article full of interesting detail on the history, economics, and politics of Saudi Arabia. There’s also a section on visiting:

The silver lining to Saudi Arabia’s lack of tourism is that there aren’t many tourist restrictions. I went to two ancient settlements and I found no guards, no gates, no notices at all. I walked in, around, and on top of 2,000 year old houses, and I honestly have no idea if I was allowed to.

Message To My Students: Don’t Use AI to Cheat (at least not yet)

Jeremy Horpedahl4 Comments

If you have spent any time on social media in the past week, you’ve probably noticed a lot of people using the new AI program called ChatGPT. Joy blogged about it recently too. It’s a fun thing to play with and often gives you very good (or at least interesting) responses to questions you ask. And it’s blown up on social media, probably because it’s free, responds instantly, and is easy to screenshot.

But as with all things AI, there are numerous concerns that come up, both theoretical and immediately real. One immediately real concern among academics is the possibility of cheating by students on homework, short writing assignments, or take-home exams. I don’t want to diminish these concerns, but I think for now they are overblown. Let me demonstrate by example.

This semester I am teaching an undergraduate course in Economic History. Two of the big topics we cover are the Industrial Revolution and the Great Depression. Specifically, we spend a lot of time discussing the various theories of the causes of these two events. On the exams, students are asked to, more or less, summarize these potential causes and discuss them.

How does ChatGPT do?

On the Industrial Revolution:

And on the Great Depression:

Now, it’s not that these answers are flat out wrong. The answers certainly list theories that have been discussed by at various times, including in the academic literature. But these answers just wouldn’t be very good for my class, primarily because they miss almost all of the theories that we have discussed in class as being likely causes. Moreover, the answers also list theories that we have discussed in class as probably not being correct.

These kinds of errors are especially true of the answer about the Great Depression, which reads like it was taken straight from a high school history textbook, ignoring almost everything economists have said about the topic. The answer for the Industrial Revolution doesn’t make this mistake as much as it misses most of the theories discussed by Koyama and Rubin, which was the main book we used to work through the literature. If a student gave an answer like the AI, it suggests to me that they didn’t even look at the chapter titles in K&R, which provide a roadmap of the main theories.

So, my message to students: don’t try to use this to answer questions in class, at least not right now. The program will certainly improve in the future, and perhaps it will eventually get very good at answering these kinds of academic questions.

But I also have a message to fellow academics: make sure that you are writing questions that aren’t easily answered by an AI. This can be hard to do, especially if you haven’t thought about it deeply, but ultimately thinking in this way should help you to write better exam and homework questions. This approach seems far superior to the one that the AI suggests.

Gambler Ruined: Sam Bankman-Fried’s Bizarre Notions of Risk and the Blow-Up of FTX

Scott Buchanan3 Comments

The drama continues for Sam Bankman-Fried (SBF), the former head of now-bankrupt crypto exchange FTX. This past week has been giving a series of interviews, in which he (the brilliant master, the White Knight, of the crypto world a mere month ago) is trying to convince us (potential jurors?) that he is too dim-witted to have masterminded a shell game of international wire transfers, and that he had no idea what was happening in the closely-held company of which he was Chief Executive Officer. (For an entertaining take on what We The People think of SBF’s disclaimers, see responses in this thread ttps://twitter.com/SBF_FTX/status/1591989554881658880, especially the video posted by “Not Jim Cramer”). 

The word on the street is that his former partner Caroline Ellison (who he has been implicitly throwing under the bus with his disclaimers of responsibility for the multi-billion dollar transfers from his FTX to her Alameda company) may well be cutting a deal with prosecutors to testify against SBF.  It remains to be seen whether SBF’s monumental political donations will suffice to keep him from doing hard time.

But all that legal drama aside, the SBF saga brings up some interesting issues on risk management. Earlier here on EWED James Bailey  highlighted a revealing exchange between SBF and Tyler Cowen, in which SBF displayed a heedless neglect of the risk of catastrophic outcomes, as long as there is a reasonable chance of great gain:

TC: Ok, but let’s say there’s a game: 51% you double the Earth out somewhere else, 49% it all disappears. And would you keep on playing that game, double or nothing?

SBF: Yeah…take the pure hypothetical… yeah.

TC: So then you keep on playing the game. What’s the chance we’re left with anything? Don’t I just St. Petersburg Paradox you into non-existence?

SBF: No, not necessarily – maybe [we’re] St. Petersburg-paradoxed into an enormously valuable existence. That’s the other option.

Boiled down, the St Petersburg Paradox involves a scenario where you have a 50% chance of winning $2.00, a 25% (1/4) chance of winning $4.00, a 1/8 chance of winning $8.00, and so on without limit. If you add up all the probabilities multiplied by the amount won for each probability, the Expected Value for this scenario is infinite. Therefore it seems like it would be rational, if you were offered a chance to play this game, to stake 100% of your net worth in one shot. However, almost nobody would actually do that; most folks might spend something like $20 or maybe 0.1% of their net worth for a shot at this, since the likely prospect of losing a large amount does not psychologically compensate for the smaller chance of gaining a much, much larger amount. But SBF is not “most folks”.

Victor Haghani recently authored an article on risk management and on SBF’s approach:

Most people derive less and less incremental satisfaction from progressive increases in wealth – or, as economists like to say: most people exhibit diminishing marginal utility of wealth. This naturally leads to risk aversion because a loss hurts more than the equivalent gain feels good. The classic Theory of Choice Under Uncertainty recommends making decisions that maximize Expected Utility, which is the probability-weighted average of all possible utility outcomes.

SBF explained on multiple occasions that his level of risk-aversion was so low that he didn’t need to think about maximizing Expected Utility, but could instead just make his decisions based on maximizing the Expected Value of his wealth directly. So what does this mean in practice? Let’s say you find an investment which has a 1% chance of a 10,000x payoff, but a 99% chance of winding up worth zero. It has a very high expected return, but it’s also very risky. How much of your total wealth would you want to invest in it?

There’s no right or wrong answer; it’s down to your own personal preferences. However, we think most affluent people would invest somewhere between 0.1% and 1% of their wealth in this investment, based on observing other risky choices such people make and surveys we’ve conducted…

SBF on the other hand, making his decision strictly according to his stated preferences, would choose to invest 100% of his wealth in this investment, because it maximizes the Expected Value of his wealth.

Even in a game with a fair 50/50 outcome, a player with finite resources will eventually go broke. This is the “Gambler’s Ruin” concept in statistics. SBF’s outsized penchant for risk took his net worth to something like $30 billion earlier this year, something we more-timid souls will never achieve, but it eventually proved to be his undoing.

Most people have a more or less logarithmic sense of the utility of money – if you only have $1000, the gain or loss of $100 is significant, whereas $100 is lost in the noise for someone whose net worth is over a million dollars. SBF apparently felt that he was playing with such big numbers, that he did not need to worry about big losses, as long as there was a chance at a big, big win. Here is a Twitter Thread  by SBF, from  Dec 10, 2020:

SBF: …What about a wackier bet? How about you only win 10% of the time, but if you do you get paid out 10,000x your bet size?

[So, if you have $100k,] Kelly* suggests you only bet $10k: you’ll almost certainly lose. And if you kept doing this much more than $10k at a time, you’d probably blow out.

…this bet is great Expected Value; you win [more precisely, your Expected Value is] 1,000x your bet size.

…In many cases I think $10k is a reasonable bet. But I, personally, would do more. I’d probably do more like $50k.

Why? Because ultimately my utility function isn’t really logarithmic. It’s closer to linear.

…Kelly tells you that when the backdrop is trillions of dollars, there’s essentially no risk aversion on the scale of thousands or millions.

Put another way: if you’re maximizing EV(log(W+$1,000,000,000,000)) and W is much less than a trillion, this is very similar to just maximizing EV(W).

Does this mean you should be willing to accept a significant chance of failing to do much good sometimes?

Yes, it does. And that’s ok. If it was the right play in EV, sometimes you win and sometimes you lose.

(*The Kelly criterion is a formula that determines the optimal theoretical size for a bet.)

Haghani concludes, “It seems like SBF was essentially telling anyone who was listening that he’d either wind up with all the money in the world, which he’d then redistribute according to his Effective Altruist principles – or, much more likely, he’d die trying.”

( Full disclosure: I have lost an irritating amount of money thanks to SBF’s shenanigans. My BlockFi crypto account is frozen due to fallout from the FTX collapse, with no word on if/when I might see my funds again. )

Ideological overconfidence is a trojan horse for entitlement

mdmakowsky1 Comment

I re-watched “The Big Lebowski”. I have watched this movie many times, but like all great films, you often find yourself appreciating new things with each re-watch. Usually these are simply small, but interesting details that simply slipped by your attention previously, but in this case it was a broad theme that smacked me in the face as if I stepped on a rake. The Dude is the Buddha.

Spoilers, both narrative and spiritual, are ahead

Let me back up. For those unfamiliar with the film, there are four parties relevant to this story. Jeffrey Lebowski (old rich guy), three nameless German nihilists, Walter Sobchak, and The Dude. Jeffrey Lebowski’s trophy wife, Bunny, runs off to Vegas unannounced. Hi-jinks ensue.

The Nihilists falsely claim to have kidnapped her and demand ransom. Jeffrey wants Bunny to go away so he can better hang on to the money she is frittering away, so he fills a briefcase with deadweight and gives it to the Dude to deliver in the hopes the kidnappers will be angered and make his problem go away. Walter becomes privy to this exchange and swaps out “a ringer for a ringer”, hoping to keep the ransom money for himself. A perfect triangle of scams.

All three scamming parties are driven by selfish entitlement and all three rationalize it behind blustery, paper thin philosophies. The Nihislists believe in a chaotic universe absent responsibility, morality, or ethics. They simply want a thing so they try to take it. Jeffrey Lebowski casually gives in to his own avarice and greed to push Bunny out, rationalized by the belief that he has earned his wealth through “achievement”. Walter Sobchak wants to take the money because he has been wronged by fate and society, an unloved Veteran whose reactionary ethos assures him that he has earned anything he subsequently takes through past valor. Over the course of the film all three rationalizations are found to be more or less fabricated, their philosophical fascades disintegrating as soon as the objects of their desire prove out of reach.

Only the Dude remains whole and unblemished. His innocence isn’t shielded by superior philosophy, morality, or intelligence. He remains above the destruction and greed simply because of his lack of desire. A burned out hippie of nearly zero consequence, his lines are the only reliable words spoken throughout the story simply because he doesn’t want anything more than to go bowling and, if possible, recover a lost rug. It is the emptiness of The Dude that preserves his soul.

Too much unbending confidence in your own philosophy often betrays a far starker reality. You don’t just want something, you want a reason that you deserve it.

Anyway. Go a little easier on each other. Make yourself a White Russian tonight. Take a moment to reflect on my remedial cinema film analysis and how sure you really are. About any of this.

Introducing Students to Text Mining II

Joy Buchanan6 Comments

In the Fall of 2020, I blogged about how I introduce students to text mining, as part of a data analytics class.

Could Turing ever have imagined that a human seeking customer service from a bank could chat with a bot? Maybe text mining is a big advance over chess, but it only took about one decade longer for a computer (developed by IBM) to beat a human in Jeopardy. Winning Jeopardy requires the computer to get meaning from a sentence of words. Computers have already moved way beyond playing a game show to natural language processing.

https://economistwritingeveryday.com/2020/11/07/introducing-students-to-text-mining/

I told the students that “chat bots” are getting better and NLP is advancing. By July 2020, OpenAI had released a beta API playground to external developers to play with GPT-3, but I did not sign up to use it myself.

In April of 2022, I added some slides inspired by Alex’s post about the Turing Test that included output from Google’s Pathway Languages Model. According to Alex, “It seems obvious that the computer is reasoning.”

This week in class, I did something that few people could have imagined 5 years ago. I signed into the free new GPTChat function in class and typed in questions from my students.

We started with questions that we assumed would be easy to answer:

Then we were surprised that it answered a question we had thought would be difficult:

And then we asked two questions that prompted the program to hedge, although for different reasons.

It seems like the model is smarter than it lets on. For now, the creators are trying hard not to offend anyone or get in the way of Google’s advertising business. Overall, the quality of the answers are high.

Because of when I was born, I believe that something I have published will make it into the training data for these models. Will that turn out to be more significant than any human readers we can attract?

Of course, GPT can still make mistakes. I’m horrified by this mischaracterization of my tweets: