Leggings Design

i'm working on a leggings design for Bombsheller.  i'm planning for this to be on the thighs

Ethical Mice

My interest in corporate social responsibility and climate change has led me to reflect on the role of ethics in industry.  Reading "Flash Boys" by Michael Lewis, "Moral Mazes" by Robert Jackall, and a collection of books and articles has given me a better idea about decision-making inside corporations and the challenges of regulating businesses.  Many of these challenges seem to be outside the standard microeconomic framework that currently dominates policy analysis.  In that framework, ethics seems quaint, but perhaps there really is no replacement.

There are many reasons to regulate the private sector: minimize pollution, improve worker safety, ensure fair prices, combat fraud, etc.  If everyone's incentives were aligned then there would be no reason for rules to be enforced.  In the standard economic analysis framework, the misalignment of incentives cause "market failures."  This means that harms, known as negative externalities, are not being accounted for in the markets of the offending products.  (They might lead to more spending in the markets such as the market for medicine).  The market failures are caused by things like transactional frictions, principal-agent problems, and asymmetric information.  Solutions to market failures involve regulating the private sector one way or another.  The objective is to align the incentives of producers with the interests of society by increasing the cost of causing externalities through fines or taxes.

In applying this framework, welfare is typically equated with monetary value.  Then businesses and individuals in them respond exclusively to monetary incentives, their decisions driven by exacting cost-benefit analysis.  The cost of regulating then, is proportional to the amount the business stands to gain from the activity.

Is this the whole story?  Does this mean ethics is irrelevant?

First I want to point out that the motivation to avoid regulation is proportional to how much "individuals" have to gain.  This is not always the the same thing as the amount the business has to gain overall because the individual is primarily concerned with his/her own career.  This is generally true for decisions in an organization.  In other words, if an initiative has the potential to cause one manager to gain recognition and a bonus rather than sharing credit with other managers, that initiative is more likely to be championed and thus implemented.  For example, according to Nassim Taleb in "Black Swan," a contributing cause to the subprime mortgage crisis was the misalignment of individuals and the business.  The analysis of risk management divisions in banks were often ignored because individuals in the trading divisions stood to gain fantastically from increasingly risky activities.

Next, let us inspect the costs of regulation more carefully.  At first glance, the cost is simply the size of the fine, subsidy, or tax.  Most analysts also take into consideration the likelihood that the fine or analogous costs will be incurred.  The cost to the regulating body of administering these programs and auditing activities is often left out of economic analyses.  Both the regulators and the businesses participate in auditing and accounting activities, although for different purposes.  The higher the tax, the more resources businesses will allocate towards evading it by either by masking its activities in its own accounting system or lobbying to cut the budget of the regulator.  It is possible to make information arbitrarily difficult and time-consuming to assess, which greatly increases the cost to regulators.  In Flash Boys, the exchanges created complicated order types.  In addition, the documentation to the SEC about these order types seemed purposefully more complicated than they needed to be.

Complicity among individuals in the industry is another driving factor for the cost of regulating behavior.  If all the businesses participate in obfuscating their activities, then they can all maintain the illusion that the level of complexity is necessary.  Idolizing neoclassical economics and the free market at the expense of ethics then is very convenient for those who stand to gain.  Believing in the wisdom of the invisible hand means that the value of one's work is evidenced by the amount one is paid.  Those who feel no need to question the purpose of their activities can be counted on to be complicit.

Even if regulators manage to administrate a program, they still may not have enough resources or information to assess the effectiveness of the program.  Measuring effectiveness often requires some additional information.  For example, the Reg NMS rule sought to make markets more fair by mandating that financial intermediaries must trade public equities at the best price.  However, financial intermediaries found other ways to scalp investors.  Regulators neglected to collect the information needed to assess the prevalence of other kinds of unfair practices.

By now it should be clear that regulating private sector activities is often an elaborate cat and mouse game.  A few fat mice are more strongly motivated and can more easily collaborate than millions of mice.  The smartest cat must be at least as smart as the smartest mice or else the mice can easily confuse the cat.

Many conclude that regulating is indeed hopeless in many situations.  Brad and his team gave up on the SEC, who had no ability to compete with Wall Street for the talent required to regulate.  In order to sell his idea, Brad had to adopt rhetoric about being "long-term greedy."  But in fact he was personally very compelled to take on the system because it is not "right."  It is significant to me that only those who with an ideal about fairness even dared to pursue a market solution.  Only ethics can provide enough drive to an individual to overcome the risk, the likelihood of a lower payoff, and the stress from causing extreme conflict among peers.

The culture around ethics and the purpose of one's job perhaps should be considered as another tool in policy-making.  The structure of incentives in an organization governs the behavior of individuals.  Moral Mazes describes the incentive structure of a hierarchical bureaucracy typical of large public corporations.  There are many similarities with the environment and culture of these corporations with that of Wall Street exchanges and investment banks as described in "Flash Boys."

It may be possible to modify the standard framework of policy analysis to include this kind of ethical motivation as a part of individuals' welfare functions.  It's not clear to me whether that is the most helpful approach.  Instead, the study of polycentric systems an cooperation could potentially be applied to such environments in order to increase the value of transparency and ethical behavior.  There may also be analytic tools from complexity theory and behavioral economics.

My theory now is that for any given industry, a minimum number of individuals with resources and talent who commit to acting ethically is needed to stunt the efforts of those who are amoral.  On the flip side, a minimum number of talented amoral individuals is needed in order to implement an injustice.  Complicity with an amoral system ultimately perpetuate the injustice systemically.  It follows then that conviction matters.  Resolve matters.  Ethics matter.

Exploring the Internet

I put this page through a word bubbler.  The result is kind of inane, but it's pretty!

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Governance and Economics and Complex Systems

I recently read a paper by Elinor Ostrom, who won the Nobel Prize for Economics in 2009.  Beyond Markets and States: Polycentric Governance of Complex Economic Systems (2010) presents an overview of the study of polycentric governance and the roadmap for future studies that are probably currently underway.  It can be thought of as a very substantive refinement of economics, where the units of study are groups of individuals who seek to manage public goods.  Sometimes they cooperate effectively, to provide services such as access to water to a city, while other times competition can lead to chaos.  Many situations and conditions can lead to more cooperation where the determining factor is whether the situation builds up trust or breaks it down.  I was personally excited that Ostrom referenced Kenneth Arrow as one of the first economists to discuss the importance of trust.

I was very glad to have read this paper.  I really think all economists, especially those who then go into policy-making really should be familiar with the work on polycentric governance.

A similar, perhaps parallel, topic is complexity in interconnected systems.  In an interconnected system, such as the economy, identifying the key decision-makers and their networks can be enlightening.  The rules governing the system may also lead to some decision-makers to have out-sized influence, leading to outcomes that no one necessarily plans out meticulously but are nevertheless inevitable.  I am still not clear on what discipline(s) this work is emerging in, but I'm definitely excited to learn more.

Conan Rehearsals

This is my latest round of favorite Conan videos!

Messing around.





Mistakes are funny.

Phun with Phake Photoshop (Paint.net)

I was designing my own business cards yesterday, and so I was changing the colors of the UC Berkeley logo. Yeah I know it's kind of stupid because the whole point is that the logo is in the school colors. But...I mean...damn the man or something, right?

My Little Poster: Improving Metrics for Corporate Emissions Initiatives

I presented a poster on Thursday night for the BERC Innovation Expo, which is an event at the annual Energy Conference at UC Berkeley!

Here it is!  I had many stimulating conversations with people about it, which was pretty exciting.

Racial Profiling, Probability, and Stereotypes

I made a simple webpage this weekend to demonstrate how stereotypes can be self-reinforcing.  For me it was an exercise in making a kind of infographic.  It's not exactly an infographic since I don't actually use any real data.  It's more about learning the relationship between mental models and outcomes, which I think of as the "underlying system."

http://mirthbottle.github.io/rprofiling/

I would like to add some "exercises" at some point to guide people in playing with the assumptions.

I would also like to link to statistics and studies about racial profiling.  I didn't start with those because I believe that understanding the underlying system is a prerequisite for understanding empirical studies.

Debate About Fairness of the Stock Market

Throwdown!

It's Brad Katsuyama, the founder of IEX, a new exchange that touts itself as being more fair for investors.  Michael Lewis joins him in defending what he wrote in Flash Boys.  On the attack on behalf of HFT is Bill O'Brien, then president of the BATS exchange.



Since the debate, the BATS exchange had to issue a statement correcting something O'Brien said, and O'Brien has gotten fired.

http://www.efinancialnews.com/story/2014-07-22/bats-global-president-william-obrien-exits?ea9c8a2de0ee111045601ab04d673622

Ferguson: Lighting a Match in a Gas-Filled Room

What is the cause?  The person who lit the match or the broken stove that filled the room with gas or maybe the person who neglected to maintain the stove?

On August 9, a police officer shot and killed a teenager who was unarmed.  Officer Darren Wilson was white and Mike Brown was black.  Originally stopped because of jay-walking, he eventually gets shot dead in unclear circumstances.  Some witnesses say (and I'm more likely to believe for the record) that he initially ran away but then turned around to surrender with his hands in the air), while others claim that he had assaulted the police officer.  Since then there have been many protests organized by black communities all over the country as well as counter-protests.

I grew up in St. Louis in a mostly white community so I'm very familiar with the perspective of many white Americans.  It definitely bothers me that many white and Asian Americans do not understand why black Americans are upset.  I think it comes down to not understanding how stereotyping can lead to systematic injustice.  In other words, assumptions about other people can be self-fulfilling prophesies.  In fact, you will even reinforce stereotypes about yourself.

Everyone makes assumptions about other people, and it is often a useful practice.  You don't have to put as much effort into finding people who will appreciate your jokes, potential customers, employees who have the skills you need, etc.  However, just because it's less effort doesn't mean it's fair.  

There are in fact more men in engineering than women.  When you meet a woman at a party, and she says she works in the tech industry, you assume she works in marketing or HR.  Statistically speaking, you will be right probably at least 70% of the time.  If it's a man, you'd probably ask what he works on since it could reasonably be anything.  For a woman, you might not bother if you already think you know the answer.  You may even be embarrassing her or yourself if you do.  As a result, if you're looking to hire an engineer, women will be even less represented in your mind's eye than they even really are.  In fact, if you're recruiting you might not even bother talking to her because hey, you're busy and trying to find someone with the least amount of effort, which is a logical thing to do. 

For blacks of course it's even worse, especially if they don't dress like most other white people.  (You might think, "Why don't they just change how they dress?"  Well, they grew up dressing a certain way because their friends dressed that way when they were growing up.  Maybe they like the way they look!) 

As a result, anyone who is already underrepresented in an obvious way (race or gender) is less likely to get opportunities and more likely to meet resistance compared to whatever the majority is.  That is unfair.  This is how stereotypes can lead to systemically racist and sexist procedures.

This is why people object to racial profiling.  Yes, it would even be "efficient" if the actual rates of perpetration among minorities and whites are actually different, which is not necessarily true.  I don't actually have the statistics on this.  However, minorities will be even more over-represented among perpetrators than their base rate because the rate of catching them will be higher.  Furthermore, it is definitely unfair to the rest of the minorities who are much more likely to be harassed as well as fined.

But actually recruiters do look for women and minorities because of affirmative action!  Exactly.  If it weren't for affirmative action, they'd put even less effort into it.

Finally, there are many reasons why we have stereotypes.  Some of them do have something to do with reality, but everyone should also recognize that our brains are made for pattern recognition.  Even if something is completely random, your brain will try to come up with an explanation.  This is a problem for any minority because the few that you meet end up setting up your expectations for all of them.  If a minority or a woman makes a mistake at work, everyone including women tends to think, "wow, that woman made a mistake."  If a white guy makes a mistake, "you think, oh, dan (this particular guy) made a mistake."

I first became very aware of my own privilege in middle school.  I grew up in an upper middle class area where most people were white.  However, a large number of black kids from the city were bused in.  Sometimes I would wander around outside of class, sometimes for a good reason, sometimes for no good reason.  I would occasionally even leave the school.  Very very rarely would anyone ask me where I was going or why I was playing games in the computer lab.  This was even when I was wearing extremely baggy clothes with large holes in them.  If one of the black kids were outside of class, though, they would always be stopped and interrogated.  On the one hand, maybe it is really more detrimental to their education.  On the other hand, by not ever being questioned, I'm clearly benefiting from my reputation as well as the reputation of nerdy Asians.

Stereotyping has been routinely making black Americans feel like they're being picked on.  If they make any mistakes or act up they are reinforcing the stereotype.  They can't complain about it or else they're playing the "race card."  Exacerbating this is that many white Americans don't interact much with minorities so they are blissfully unaware about the issues. This has caused escalating racial tensions across America, which exploded into protests last month.  Any mistake in the logic of black protesters or rioting gives many white Americans reason to dismiss their grievances entirely.  Hopefully, there has actually been some productive dialogue as well.

I am not immune to stereotyping.  But at the same time, I'm not going to defend myself and say I'm always fair.  We should all acknowledge that making sure things are fair is difficult.  It may even be impossible to be completely fair, but we should still try to stop adding fuel to the fire.  We should keep thinking of ways to make things more fair.

Learn more about racism and Ferguson:

http://www.theatlantic.com/features/archive/2014/05/the-case-for-reparations/361631/

http://www.theatlantic.com/magazine/archive/1999/08/thin-ice-stereotype-threat-and-black-college-students/304663/

http://www.stltoday.com/news/opinion/why-gov-nixon-has-to-remove-prosecutor/article_0e297a8a-073b-5f0e-8bd5-fd31429e8072.html

My tech recruiting example in action!
https://medium.com/@trisha/a-hilariously-sad-tale-of-gender-bias-54919595e482